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Alan E. Tannenbaum, Board Certified in Construction Law, is the Managing Partner of Tannenbaum Lemole & Hill construction and litigation sections. Mr. Tannenbaum received his undergraduate degree with honors from the University of Miami in 1975 and his juris doctorate from Florida State University in 1978.

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The Smart Board & Property Manager Legal Guide: Dealing With Inquisitive & Disruptive Owners

Alan Tannenbaum, Esq.:

I would like to welcome everybody to our Smart Board & Property Manager Legal Guide today. It's a topic that you folks requested be discussed, so we put it on the agenda. Based upon the amount of people who have responded, it is an issue that's at the top of mind for a lot of associations. This is Alan Tannenbaum. I'm here with my partners, Cindy Hill and Jon Lemole. Jim Turffs is also with us. We're going to be dealing with inquisitive and disruptive owners and how best to deal with it. I don't know if it's a product of a general breakdown in civility in society, a lot of the pressures that people are on economically so forth, but there seems to have been an uptick on issues of confrontation around the state.

We have associations where it seems like a quarter of their legal budget is being spent on dealing with document inquiries and disruption at meetings, dealing with information that's flying around online. People set up websites of various sorts, but is created a significant problem. So we're going to cover some of the basics of the statutes, document requests and written inquiries, some protections or limitations on participation at board meetings. But then we're going to get into in the last half, online communications, physical intimidation and harassment, how best to deal with that. So at this juncture, I'm going to turn the first section over to my partner, Cindy Hill who's going to talk about requests to inspect and copy association records.

Cindy Hill, Esq.:

Good morning, everyone. I'm Cindy Hill as Alan just said. We're starting out the presentation with more of the inquisitive part of the presentation, and we're going to get down to I think what most people are more interested in honestly in terms of the disruptive part as we get further down in the presentation. But it is important to start with this inquisitive part with I see a lot of misunderstanding with board directors and owners in particular about their rights to request to see records. Condominiums and homeowner associations are corporations and the owners are members of those corporations, and they have a right to see the corporate records, generally, with some statutory exceptions. It's important that the timeframes and the rights that involve are understood so that an association doesn't inadvertently fail to comply with the statute because there are some penalties.

So although the statutes have some similarities, I'm going to start by going over condominiums and then go over homeowner associations in order to make it easier to see what the statutes are. Because if you know where to find this information specifically, it's much easier to address how to respond to an official records request than trying to just open up chapter 718 or 720 and find where it is. Starting with the condominiums, again, chapter 718, when you receive an official records request from an owner, and I should add if they send it via email and you don't have a policy saying they can't send it via email, it could be considered an official records request. Sending it certified mail creates a presumption that the association did receive it and can run this 10-day trigger that I'm getting ready to discuss, but an email can also be considered an official records request.

So I strongly encourage my associations to have policies governing how a request is made because, again, as you can see here in this statute that the request must be responded to within 10 working days. About halfway down there, the association has to respond to request within 10 working days after receipt of a written request from an owner to review records. If they've sent it certified mail, there will be a signed card to sign and the association will then have a clear timeframe. Again, if an owner sends it via email, you might not even get it on the other side. So these are considerations to think about because 10 working days, by the way, and I don't know why they say working days instead of business days, but 10 working days is your timeframe for turnaround.

Now the next issue is you get owners who think that the records have to be emailed to them or mailed to them or that they have a right to somehow have them delivered to them, they do not have that right. The association has the discretion if they want to to email records to an owner, particularly if it's just one record and it's easier to do that than schedule an inspection, but the association is not obligated to do that. As you can see in the statute, compliance with a request is met by having the records available for inspection or copying, and you can make them available, again, electronically. But compliance is having them available for inspection or copying, which is scheduling a time for the owner to come in and review the physical records. If that's what the association chooses to do, that's the minimum they're required to do.

If the records are not actually printed out, the owner can look at a computer screen and ask that they be printed because in a world where we used to have boxes and boxes of documents, that's not really the case anymore. We now have a lot of documents that are only digital, so if an owner requests to have those printed, you can do that. I also have associations that provide flash drives. So there's a lot of flexibility on the associations part 'cause the limitation, the absolute minimum they have to do is make the records accessible. Again, they don't have to email them out, they don't have to mail them out. They have to make them accessible, and they have to make them accessible in that 10-day timeframe, which means not necessarily they have to deliver the documents in that timeframe, but they need to contact the owner and let them know the records are available for them to schedule a review and come see. So moving to the next-

Jon Lemole, Esq.:

Yeah, we actually had a question about that in the chat. I think the key point, and correct me if I'm wrong, is that the statutory requirement is relating to an inspection of the records. That would be the key word, right, that you don't have to provide copies if you don't necessarily want to. You have to make the records available so that the owner can come in and look at them. Is that a fair point?

Cindy Hill, Esq.:

The word the statute uses is makes accessible, access, access to the records. I'm going to get to copies and what they can charge for copies as we go down. But yes-

Jon Lemole, Esq.:

Okay.

Cindy Hill, Esq.:

... that is the point to make that records have to be available for access by the owners. So again, an association doesn't have to scramble around and email everything to someone within 10 days. Within 10 days they have to respond to the request and say that the records are available for the owner to access. Usually at management's office, that's usually how it's done. If you're self-managed, there's some more challenges for that, but that's getting off point.

Alan Tannenbaum, Esq.:

Cindy, can there be a limitation on the number of requests that a particular owner makes?

Cindy Hill, Esq.:

But under the statute, no. If you're just operating under the statute, owners could be making requests every day. That being said, if you've already provided access to records, one of your responses can be, "We already gave you access to those records." Repetitive requests are not favored, but an owner could make repeated requests, absolutely, if you don't have a board policy. For the next condominium slide, this one was 718.111, okay, 12(c), it looks like it has moved on. Okay. Owners have a right to make copies under the Condominium Act at a reasonable expense. There's more specifics in the HOA Act. I'm going to describe them in a moment, but a reasonable expense. What does that generally mean? If you're in doubt, you can send them out to a copy service if it's a certain amount of documents. For instance, if they want 300 copies, you can send it to a copy service and charge them for that expense. That would be a safe way to approach it.

Other than that, if an owner only wants two or three pages of something, is it even worth nickel and diming for that? These are considerations that you can put into the policy, as Alan was just asking, the boards have some discretion as to how many requests can be made. Board has some discretion as to what they consider reasonable expense and putting in a policy so an owner will not claim to be surprised, that it's going to have a cost to have a certain amount of records actually copied, which is also what this statute says, that the condominium board can adopt rules regarding the frequency, time, location, notice and manner of record inspections and copying. These are policies that can set all of these expectations onto paper so that you don't get owners who think they're being picked on because they have to pay for copies or think they're being picked on because they have to come into the office. You can respond and say, "We are not picking on you, we're not putting burdens on you, we have a policy.

We have a policy so that all owners have expectations about how the process works, what they may be charged, and that everyone is treated equally." So I strongly recommend having policies. As Alan was saying in the opening comments, we are seeing more and more owners who are requesting official records, repeatedly requesting official records because for whatever reason they think that maybe that's going to hassle a board they don't agree with. We're seeing a lot of official records requests that are getting quite onerous, so a policy can really put some breaks on that. Again, when I was saying you have the 10-day timeframe, there's a penalty potentially if you don't follow it. Failure to provide the records within 10 working days creates under the statute a rebuttable presumption that the condominium association willfully failed to comply. Under that claim, the condominium association can be fined a minimum of $50 a day up to 10 days.

So not necessarily the biggest fine that an association could impose, but certainly worth considering and also worth considering that the condominiums do have a duty to provide access to official records, and failing to do so can really lead to a lot of problems in looking not transparent and not complying with Condominium Act. So before I move on to HOAs, though, one last tweak that condominiums have that the HOAs don't have in their official records request statute is that condominiums must make certain records available to renters. Those records are the governing documents, your declaration of condominium, your articles of corporation, your bylaws, any rules and regulations and any applicable milestone inspection reports or turnover inspection reports. So those do have to be available to tenants, so be aware of that to the extent that for years there was no obligation to provide records for tenants unless a tenant was an authorized agent or the owner, there is now a tenant obligation.

So moving now to the homeowner association statutes on point, they are very similar, same 10 day. This one does say 10 business days after receipt by the board or its designee of a written request. Stronger language here supporting a certified mailing or a mailing other than an email. But again, a policy will help clear that up. Going back to Jon's question about what is the proper term for what the obligation is, the obligation again is access. Compliance with the request is met by having the records available for inspection or copying or by making it the option of the association the records available electronically. So again, the obligation is to make the records available for inspection accessible, and at the option of the association if they would rather make them available electronic, they can do so. The copy provision of the HOA Act is more specific than the condominium.

This one provides that if the homeowner association has a copier where the records are maintained, it must provide parcel owners with copies on request during the inspection if the request is no more than 25 pages. So if the request takes place at a management office where there's a copier for homeowner association up to 25 pages can be provided. It also says that owners can use their portable devices to make copies. That's standard industry practice now, but going back 10 years ago or so, there was some debate on that, but no debate anymore. People can bring in their own scanners, their own printers, their own copiers. They can use their smartphone, they can use their iPad. They can make digital copies on their own. The association cannot charge for that or restrict that.

Returning to if it's not already been said enough, the board policy, oh wait, not to written inquiries, slide needs to back up. HOA boards also have the option to make a policy for record inspection, but the statute limits them that they cannot limit a parcel owner's right to inspect records to less than one eight-hour business day per month. I've had some owners debate. What that means, they get a whole eight hours to inspect records. Well, no, it's just that they can't limit it to less than eight hours a month. So for instance, they couldn't tell an owner that once a month you can only have two hours to inspect records. I'm not sure where this particular restriction came from, but again, it can be useful for limiting owner requests that are getting onerous.

The penalties are very similar for HOA that it's a rebuttable presumption that they willfully failed to comply if they don't meet the 10 days and $50 a day up to 10 days, $500. Before I turn this over to Jim Turfs who's going to discuss condominium written inquiries, some general considerations, and we could spend this whole presentation, by the way, on official records requests. So I know there's going to be questions, but some general considerations are that the $50-a-day, up to $500-a-day potential penalty is not automatic. We've had owners send invoices for $500 due for the alleged failure of the association to provide records. It is not an automatic. If an owner does want to contest and seek those fees, they're going to have to go in front of an arbitrator or a judge and have a ruling.

Another general consideration is there is no obligation to create records that don't exist. When you have an owner who asks for, "I'd like a list of," whatever, "a list of violations," if you don't have a list of violations, you don't have to make one. Another consideration is that there's case law saying that it's not excusable for an association to not provide financials due to the fact they're with a bookkeeper or accountant for review. Financials should always be available for owners to review. Another consideration is while a tropical storm or hurricane can be reason to delay the ten-day timeframe, it can't be extended unreasonably. Once businesses are operating, it's expected the association will also be operating.

I could spend another 20 minutes on this topic, but emails, texts, there's a lot of questions about that because, of course, emails are primarily how many boards are communicating. An email can be an official record open to inspection by owners if it is related to the operation of the association. That's the language in both the HOA and the condo statute that all records that are related to the operation of the association are in the catch-all provision. In addition to the records that are listed, it must be provided. So an email can potentially be related to the operation of the association and may be provided. If a manager's copied on the email, there's a strong argument that it's related to the operation of the association and must be provided.

There is a condominium declaration from the Division of Condominiums, which is not, I won't get into academics, but let me just say it's not necessarily binding, it's persuasive that says that an email does not have to be on a device owned by the association in order to be accessible. It can be on a private device such as someone's smartphone and maybe still be accessible. That's a whole can of worms that I could spend another 10 minutes on. I'm not going to, but if I haven't already made clear, policies will really help with these issues. They'll provide clarity, understanding and procedures so that you won't necessarily end up in some of these potential pitfalls that these laws offer if you're not ahead of the game, so to speak. So with that, Jim, I will turn it over. Well, let me pause. I don't know if there's any questions, Alan or Jon, you think should be discussed before I turn it over to Jim?

Alan Tannenbaum, Esq.:

No, go ahead. Let's get on to the next section.

Jon Lemole, Esq.:

Well, okay. I was just going to say it bears noting that there are some privileged things that don't meet. It's in the statute, but there are some things that are protected from records inspection again-

Cindy Hill, Esq.:

Jon's absolutely correct.

Cindy Hill, Esq.:

That's a question you do need to consult with your association counsel, because the understanding of those protective records can actually be rather complex depending on what they are.

James "Jim" Turffs, Esq.:

All right, I'll jump in and start talking about written inquiries. For those of you who are HOA directors, you can take a nap for the next five minutes. This does not concern you. Written inquiries pertain only to condominiums. It's only a right guaranteed under 718, so we focus solely on condominiums here. So a written inquiry is basically an owner's attempt to ask you a question. They can send it to the board, it can contain multiple questions. By statute, it must be written, delivered to the board by certified mail, and the board will have 30 days to respond. The board can respond in a couple different ways. It can either respond by saying, "Here's the answer to your question," if the board happens to know that off the top of their heads. They can reply to the owner saying, "We've had to ask counsel for additional information or an opinion," so they get an extra 60 days from the date they receive or an extra 60 days. It's extended to 60 days from the date the board receives the request to respond with the attorney's opinion.

While I don't see it happen very often, the board can also ask for additional information or opinions from the Division of Condominiums. If they do that, you almost get a blank check in how long it takes you to respond because you only have to reply within 10 days of the division replying to your board's request for information. So it can essentially be anytime until the DBPR gets back to you, in which case you have 10 days to respond. It's important to remember that it has to be in certified mail because it starts that clock. Delivery to the association triggers that first 30 day or whether it's 60 days, whenever it is that clock starts to run from the date of delivery. Now if you violate that and you don't reply within the 30 days or whatever other deadlines you are, the penalty for the association is that you're risking waiving attorney's fees.

Even if there's a lawsuit about this written inquiry or those topics and you prevail, you may no longer be able to recover your attorney's fees if you did not comply with that 30 day, 60 day whatever applicable time limit, so that's the penalty there for that. Like with the right to speak at meetings or records requests, the board can adopt rules limiting access to written inquiries. The statutes even suggest, as an example, that the board can restrict written inquiries to once every 30 days. That's going to tie in here as we start to talk more about those disruptive owners who try to weaponize information requests to the board and just want to send written inquiries every day about different topics, just almost as a method of harassment.

So sometimes when you have owners like that or when that situation arises, the best tool might be to pass a rule that says, "You can only submit one written inquiry per unit for every 30 days." On the flip side of that, the board can also make it easier to submit written inquiries if that's what they want to do. You can say, "We're going to accept email written inquiries now," and it'll be from the date we receive the email that that clock starts to tick. Whether that's appropriate for your association is a board determination. In our experience, it's probably more common to restrict the amount of written inquiries you get rather than make it easier. But it just depends on how helpful the board wants to be in those circumstances. That's the brief rundown there of written inquiries. I don't know if anybody has particular questions about that, if they want me to focus on anything else?

Jon Lemole, Esq.:

I guess there could be some interpretation between what is a written inquiry versus what is a records request or if you get a combination of both, right?

Jon Lemole, Esq.:

When these requests come in, you would have to scrutinize them carefully because you may have different response times depending upon what is the nature of what's being asked.

James "Jim" Turffs, Esq.:

So yeah, official records inspections requests can come through email. That's been determined that an email is a written request for the purposes of official records. When it comes to written inquiries, those have to be done by certified mail unless you've allowed for some easier method of delivery. So when you get a certified letter, you know that there's something in there. As we get on later on when I come back to present further in this Smart Board today, I'm going to be talking a little bit about the duty to respond to emails and how that ties in. You may not always have to reply to an email, but you should always be reviewing it because there might be something in there that you're obligated to respond to. But written inquiries are pretty narrow in that regard because they do have to be via certified mail.

Alan Tannenbaum, Esq.:

All right, let's get on to board meetings.

Cindy Hill, Esq.:

The good news is this one is a much more brief topic than the official records one, which went on quite a while. Participation at board meetings, so starting with the Condominium Act 718. Owners have the right to speak at meetings on all designated agenda items subject to reasonable board rules, which can govern the frequency, duration and manner of unit owner statements. So again, you have some policy options here. Board-created policies to put some limitations on how and when owners can speak. So that's worth if you're having some disruptive meetings and even if you're not in anticipation that someday you might, getting with your council to create a board policy on that is a very good idea. Also under the Condominium Act, owners can record or video meetings. There's a lot of misunderstanding about that right. First of all, because rights to record people, rights to video people vary from state to state, so if somebody tells you, "Oh, in Nevada we can't do..."

"Okay, well that could be accurate. But we're in Florida and in Florida condominiums and the HOAs have a statutory right to record or video association meetings, and they don't have an obligation to say that they're doing it." But I do advise my associations at the beginning of meetings to ask that anyone who's recording to please let people know as a courtesy because it is a courtesy to let people know if they are being recorded. Condominiums are restricted by, there's a Florida Administrative Code rule as to what they can do for videoing in terms of rules for limiting it. They can require advanced notice to the board if someone wants to use, let's just call it like almost movie-making equipment. So if somebody wants to record something with their smartphone, they don't necessarily have to advise anyone. But if they want to bring in a bunch of equipment and speakers and things like that, you can't have a policy that requires that they give advanced notice of that and that they can't use disruptive equipment.

Not sure what that would be, but it certainly couldn't hurt to limit it, that they can require any equipment be assembled in advance to the meeting and they can also require that owners not move around the room while they're recording. That can potentially limit somebody from getting right up in someone's face, which is not best practices in terms of a professional business meeting. For the Homeowner Association Act, the restrictions are similar, that owners have a right to speak at meetings on all designated items. Again, subject to board rules which can govern the frequency, duration and manner of the statements, including having a sign-in sheet. That's another thing to consider. Sign-in sheets can not only reflect who was at a meeting in terms of having the specifics, but can also help for having an idea of how many people want to speak at the meeting at the time it opens, because again, some of these restrictions are intended to respect everyone's time.

I have seen owners get upset thinking that they've been cut off 'cause their opinions are such that they want to speak for 10 or 15 minutes. Every owner is entitled to their opinion. They're not necessarily entitled, though, to a long-winded version of their opinion that eats at the time of other members who are attending. They always have the right to contact the board and writing or email, but you can limit how much speaking they have at meetings. Again, just general considerations for both condos and homeowner associations for meetings, board policies can be very useful for particularly large communities. Because if you get a large turnout, you do need to have some time management so that everybody's not at a meeting for six hours, again, also for any association where there's some controversy or some disruptive owners. Going back to Alan's opening, it does seem that since COVID we've had more disruption than less, unfortunately, so that helps with that.

Also, a consideration to keep in mind is condominium and homeowner association meetings are private corporate meetings. So you can have a policy that limits who can attend meetings and who can speak. So for instance, you can state in a policy that tenants cannot attend a meeting, that the only persons who are not owners that can attend a meeting have to be invited or authorized by the board. But you can make some exceptions for spouses. There's a lot of room there to make clear as to who can attend and who cannot attend a meeting. Then finally, this will not be news to a lot of you, but for those who don't know, three minutes is the industry standard limitation on owner's right to speak on any particular agenda item. So while I was talking I was not monitoring the chat. So Jon, do you see anything that looks on point?

Jon Lemole, Esq.:

Yeah, and this is a question I think we get in our office frequently is, prior to COVID and the widespread use of Zoom, it was just standard practice you'd have a board meeting at a room or a library or on site at the cabana or something like that. After COVID, we've all gotten used to Zoom. So are there any bright guidelines about do meetings have to be physically in a space where owners and members can go to if they want to? Can you have just Zoom meetings for board meetings? How does that break down, Cindy?

Cindy Hill, Esq.:

There are ways to tweak governing documents to make some exceptions, so I can't give a blanket standard statement on that. But I can say that if in doubt have a place where owners can come and participate physically because that has been the requirement. The statutes have not been tweaked to really change that. There's some discretion in chapter 617 which governs not-for-profits, but I would say just if in doubt, have a location where owners can come physically and then if they want to attend by Zoom, they can.

Board directors have the right to attend by Zoom. They don't have to be present physically to have a board meeting. I can say that. But one of the biggest considerations of having membership meetings via Zoom is making sure that owners do have voting rights remotely, because if they don't, if they don't send a proxy in, they might not be able to vote at a meeting. So that actually gets more complex. We could spend another 20 minutes just on that, but I'm going to go with if in doubt, have a physical location for your meeting and make Zoom an option if you want to. You don't have to.

Alan Tannenbaum, Esq.:

... the adoption of rules and policies. Can you just spend a minute mechanically on how a board goes about adopting a rule or policy? Does it have to be published? How does that work generally?

Cindy Hill, Esq.:

Well, there could be requirements in an association's bylaws that go above and beyond the statutes, so I can't speak to that on a blanket answer. But I can say that generally, a board policy that is governing meetings or governing owner record requests is going to be one that a board can approve at a Dewey Notice Board Meeting where that's on the agenda. They don't have to mail out those policies in advance to owners, again, unless their bylaws have some restriction in there, they can be approved as standard board decisions are approved at every board meeting.

Alan Tannenbaum, Esq.:

Would it generally then be a good idea to publish those after they're adopted?

Cindy Hill, Esq.:

Oh, yeah. Yeah, sorry I didn't get to the second part of your question. Definitely you want to make those available where your governing documents are available because the purpose of the policies is not just to put some enforcement on what owners can do, but also to make sure that your owners feel that they understand that there's a process and that they can follow it and manage expectations that way, so absolutely.

Jon Lemole, Esq.:

There's a couple of questions in the chat that all seem to be related to you have that the owner at the meeting who either exceeds the three-minute rule or becomes disruptive at the meeting, what are the options of the board for that? Maybe Jim is going to cover this a little bit in another section, but you've got that disruptive owner at the meeting who is exceeding whatever the policy is. What do you do about that? I don't know that there's an easy answer. I know that some boards, especially in South Florida, have had police sheriffs at their meetings from time to time.

Cindy Hill, Esq.:

That's part of what I have on my final topic is to just address that issue. You're right, that is one of the options is to call the police or hire an off-duty police officer. Going back to recording, in my experience, another option is to record meetings 'cause sometimes, not always, but sometimes people act a little better if they think they're being recorded.

James "Jim" Turffs, Esq.:

Yeah, there we go. All right, so this one's a little bit bigger. Written inquiries, there's only so much to say about the topic. The statutes tell you what you can and can't do, but as we're now moving into a more tech-savvy world where even what are now your older owners are becoming more familiar with the technology, we're starting to have to deal with online communications, online groups, all that fun stuff, which historically wasn't really an issue. Of course, the law and managed community law especially is just slow to evolve, but we're getting there now. So online communications in a lot of different forms are starting to become more prevalent and we're starting to sift through those specific issues as they come up in community management. So like I was saying when Jon asked earlier, my first big point is that by and large, directors have no obligation to respond to an owner's nasty emails.

So we're starting to get into more specifically in online communications, harassment and weaponization of online platforms and those common pitfalls here. So again, a CAM may have a special duty to respond to emails as they come in regardless of the content. They may have a company policy, they have a Florida Administrative Code, which may require some answers. But directors are there to do their job, and they're there to respond to reasonable business-related emails and things like that. Once an owner gets out of hand, and if they just start sending emails like, "Oh, you're the worst director, you're terrible. You've done this wrong, you've done this wrong," you don't need to reply to that. In fact, you're usually better off not replying to those types of emails, and just don't feed the fire. Let that angry owner vent their rage. Don't push back, and just let it go when you can.

But the point is, they may sneak information into those nasty emails that you do need to reply to. If somebody says, "Hey, you're the worst director ever. You're a terrible person. By the way, I need a reasonable accommodation for my disability," you're going to have to reply to that portion of the email. You're going to have to identify the reasonable accommodation request and handle things like that. So we have clients who come to us and say, "Oh, that person is just out there to harass us. They won't read their emails anymore, don't read their letters, just put them in the circular file and be done with it." We can't do that. We have to at least read those communications as they come in because there may be important content in there and we can't just ignore it. We ignore it and say there was a reasonable accommodation request buried in all of the other, we'll call it nonsense, you could just be opening yourselves up to liability.

So we try to avoid that, and we do have to get in there. So be careful when your board is dealing with a particularly harassing or intimidating owner. Don't let them sneak something past you just because you're used to their bad behavior. So now we're also transitioning just aside from those emails, which obviously email has become so prevalent now and everybody has to deal with some nasty emails from time to time, but we're also getting into social media now. Some associations are starting their own social media sites, whether that's a Facebook group or a Nextdoor style app, there can be an official representation. The board can utilize those assets effectively. You can create friendly groups, but the question is, what do you do when an owner starts creating a Facebook group or a website or something that's antagonistic to the board? Again, we're talking about disgruntled owners here.

We know they come up, we have to know how to handle them, and sometimes they want to post that website that says, "X HOA is the worst," and things like that. Now there are limits that have to be observed. Owners have the first amendment right to express their opinion. They're allowed to go out and say, "You're the worst association ever," and they're allowed to tell you why they think that. What they can't do is pose as the association and say, "Oh, I am the official association website and we're saying this, this and that." That can't be done. There's a trademark confusion issue. There's usually something in your governing documents that says, "Only directors can represent the association in an official capacity." So there are a lot of things wrong with an owner attempting to supplant the association in generating a website or a social media group.

That aside, owners may be able to create private groups amongst themselves to discuss their neighborhood. If block seven of your HOA decides to get together and start to block seven Facebook group, they can do that. To some limited degree, they may even be able to share association records in that way. Cindy, you already talked about how official records are records of a private corporation. They're not meant for public consumption. But if there is a way to gate-keep that sort of community, if there is a Facebook group and the only members of that group are members of the association as well, you may be able to share, say, meeting minutes with those other members of the group. Again, express your opinion about those as an owner.

What they can't do and should be discouraged from doing is putting a public website saying, "These are the accounting records of the association for the world to see. This is how bad they are." That shouldn't be done. Now you're publishing a private corporate record on a public forum, and you're violating some standards there. We certainly have issued cease and desist letters for that sort of behavior in the past, and it usually takes care of it. But there have been lawsuits out there dealing with owners who have put up websites disclosing far more than they should or trying to take over for the association and hold themselves out as the official association. So those are things we have precedent for and we know we can address as they come up.

So the other concerns that we see coming around very often are just, it's usually about bad-mouthing, and we have a lot of directors come back and saying, "Well, they've said this about me. They have said this about our association. It's not true. It's wrong. Tell them to stop," and sometimes we just can't do that. Again, if it's blatantly wrong, if it's something that rises to the level of defamation in the state of Florida, there might be some actionability there. But by and large, as long as they're not outright lying about you and they make it clear that it's their opinion, an owner is allowed to say nasty things. So again, I harken back to my advice about emails. If an owner is just saying something nasty about you or nasty about the association, you don't always have to reply. Let them vent. Let them get their stuff out of the way. It will go away. It will blow over.

If you start pushing back and you start going, "That's not true. You're a terrible owner, you're a terrible person for saying this," you're just going to start a war that may never end. So exercise some reasonable discretion there. Reply to what you absolutely have to reply. If something is violating your governing documents or the statutes, contact your association's council. We can evaluate what the next step is, whether that's a cease and desist letter, whether there is something actionable there or whether there's just nothing you can do about it, let us know and we'll provide you with that sort of guidance. So we'll see what else happens with social media and online communications as time progresses. Obviously, it's going to become more and more prevalent, and I'm sure we're going to find new ways to make director's lives difficult through social media and especially CAM's lives difficult through social media. But for now, these are the somewhat more frequent issues that we're seeing. So that's where I am on online communications there. Any questions coming through that need to be addressed?

Jon Lemole, Esq.:

There was a question, Jim. One of the points you made is that a member shouldn't be allowed to post up corporate documents for all the world to see, and that would certainly be subject to a cease and desist letter and maybe even further enforcement action against that member. But let's suppose you have a situation where there's maybe a private Facebook group that only constitutes the membership or a portion of the membership of the community. Is there some issue with disseminating records that an owner may have gotten through a records request in that kind of a forum to other owners within the community as long as it's limited to the other owners? I would think that there probably isn't, but...

James "Jim" Turffs, Esq.:

Yeah, as long as they're members, they're going to be entitled to view that information. It is about the differentiation between who's receiving it. Is it just members of the association or is it open to the public at large? And membership almost always equates to ownership. So if somebody's not an owner in your association, they should not be looking at your corporate records or corporate documents. They're not entitled to see that under governing laws or the statutes. The statutes are very clear that it's an owner or in some instances it can be a representative of an owner who are entitled to request official records and things like that, but it shouldn't just be published. It's not meant to be a public record in that sense, so yeah.

James "Jim" Turffs, Esq.:

If you have a completely closed group, and that's a situation that's come up recently where there has been a director saying, "Hey, there's this group over there, things are being published, make them stop," and the questions we have to ask are, "Well, is it a public group? Is it a private group? If it's a private group who's allowed to join?" Sometimes those questions answer themselves in a way that says, "This is a private dissemination of information and sometimes it's public, and what we do depends on that."

James "Jim" Turffs, Esq.:

My recommendation is not to allow anonymous posts, but sometimes there's just no way to stop it. If it's an association controlled website, they may have the right to take down anonymous posts, they may have the right to limit anonymous posts and things like that. I would advise maybe a case-by-case analysis of that sort of thing. Sometimes it's worth it, sometimes it's not. Sometimes getting rid of just an impolite post causes more problems than just letting it go. So I would be hesitant to issue a hard-and-fast rule about that other than to say a lot of this communication stuff is going to be context-driven. So if there's an anonymous post or something and you really don't know what to do with it, ask your lawyers and we'll at least make up an answer that sounds reasonable.

Alan Tannenbaum, Esq.:

Let's move to our last section, Jon. I think Cindy is going to handle physical intimidation and harassment.

Cindy Hill, Esq.:

Well, I'm going to do my best to give you some guidance. I'm looking at the chat answering some of them as I can, and I'm seeing a lot of frustration with people acting badly. I just want to, before I get into this last part of the presentation, say that realistically, there's only so much you can do. Some people are just bad players, and I have a phrase that I like to use, don't reward bad behavior. Sometimes that's really all you can do is not... to the extent people are looking for a rise or looking for a confrontation. Just do your best to just not give them that because community associations are not police. They don't have government authority. They people have a right to their opinion. So I hear the frustrations. I just want to be full transparent along the lines of your association council cannot solve all these bigger societal problems.

Okay, so getting to physical intimidation and harassment. Physical intimidation, you really want to try to do your best to avoid that. Again, we don't want to have to call the police to a meeting. You don't want to have people who get injured, who get hurt. But keep in mind, to the extent that owners come to you and say, or the board comes to management and says, "Somebody got in my face, someone threatened me," it is not the role of the association to serve as the police. If someone feels physically threatened in the community, they should contact the police and make a report or do what they need to do to protect themselves physically. With the exception of larger communities, big buildings that actually have security guards, majority of the associations out there do not have any police power.

So outside meetings, again, the advice should always be, and I tell a lot of my associations just even try to put this in a policy or try to put it out there on the website that if anyone feels threatened in the community to call the police. Now, it came up earlier what happens if you have a meeting where somebody won't stop talking? If you have a meeting where people are starting to get up in people's faces, it's looking like you're starting to feel like maybe you're in a disruptive bar, rather than in a professional corporate meeting, the association can hire off-duty police officers to attend meetings. Sometimes that helps with someone who might normally be more aggressive knowing that there is someone in the room who is giving them the stink eye for their behavior. You can certainly end a meeting if it becomes disruptive. You can end it and continue it to another time, or you can just flat out end it and then re-notice a meeting.

If you can't conduct business because someone is so disruptive that the meeting can't take place, you might as well just end it. Then that does send a message to the disruptive people that you're not going to let them go on and on and on. One of the questions that came up in the chat is, could we bar someone from attending a meeting? Well, that's a tough thing to do, but potentially you could. If someone has made threats of violence, if someone has repeatedly disrupted a meeting, you have some options there to discuss with your counsel in terms of advising them that they no longer have the right to attend a meeting or speak at a meeting is applicable because they are acting in a matter that is hopefully in disregard of any civility and are a safety threat to the members of the meeting.

So harassment, that's a loaded term. People tend to claim they're being harassed if they just don't like maybe the message they're getting. So there's a difference between not liking someone's message and harassment along the lines of do you have an owner who's sending you, I don't know, 15 emails a day as a board director? As Jim said, you don't have any obligation to respond to those. But when it gets to emails generally, but when it gets to be your cell phone's dinging off 15 times a day 'cause somebody who's for whatever reason decided to focus their concentration on the board, you have some options there in terms of labeling such contacting or maybe even calling repeatedly as harassment and letting an owner know that their emails will not be responded to board directors, that they have to send everything to management, because they have abused professional courtesy to block them from the phone.

Again, have management be the one, and I'm sorry managers, but at least managers are paid, board volunteers are not, have the management company be the direct contact for some of these folks. We've even had associations who made our firm the direct contact for some folks because they were just unwieldy to deal with, otherwise. That's an expensive option, but sometimes in the interest of saving sanity of board members and managers, it can be an option. We've had to tell owners they could not harass managers. That has happened as well. So I hate to say there aren't easy answers for these, but I hope I've given you some things to think about and go to your association council with if you are having scenarios where these problems are occurring.

Jon Lemole, Esq.:

Is there some line where there's the opportunity, let's say for the association to bring some sort of covenant enforcement action against an owner? Is there something to enforce against an owner who is repeatedly harassing other members, harassing the board, creating disruptive or performing disruptive behavior in the community? Does there ever get a point where it rises to that level that it is a violation somehow of the governing documents that is enforceable?

Cindy Hill, Esq.:

It can be. Again, going back to if you have some rules in your bylaws or if you have a policy about meeting behavior, it can be punishable. If someone is absolutely disrupting in a meeting on a repeated basis and not following clear rules and guidelines, safety is always going to be a big issue. Again, if you have someone who's presenting a safety problem in the community, I will let Jim maybe follow up on these questions as well since he does litigation, but there are some potential enforcement actions in court for people who present a safety issue to the association. So it's really going to depend on what rights are in the documents and how bad the problem is. It's going to be a combination. Jim, did you want to weigh in on that?

James "Jim" Turffs, Esq.:

Yeah, and again, the caveat here is everything is context-based. What exactly have they done? Where have they done it? Who was around? But almost every declaration I've ever seen has a nuisance provision, which is a pretty broad catch-all for a lot of things. A nuisance as it's defined in most declarations and commonly throughout our area of law is anything that's going to disrupt your neighbors or another owner's right to quiet use and enjoyment of their land. So if you're doing something that truly interferes with their ability to live peacefully to some extent, yeah, we can probably take some action. There's a fine line, though, because we don't want associations to become the security guard.

The association doesn't necessarily have a duty to protect its members. Some declarations do. I've seen ones that absolutely say, "The association will provide security and do this, this, and that." But with that responsibility comes liability, and we don't really want the associations to become the police. So if there's a disruption that comes to the level of violence or something along those lines, we want to get the authorities involved. Otherwise, the best we usually want to do is send violation letters. There's usually some version of some provision within the declaration that's being violated by incivility or angry shouting or things like that. But there may be limits on what the association can do when it comes to disruption as it would be.

Alan Tannenbaum, Esq.:

We haven't really talked about defamatory statements. So if an owner either online or on a website is publishing statements that may be defamatory about particular board members or the board as a whole, do you think it's appropriate for association funds to be spent to deal with maybe defamatory statements? Or is that something that would be personal to a individual board member who's being defamed?

James "Jim" Turffs, Esq.:

There have been cases in which associations have had to prosecute defamation cases and they have won. Have I ever seen one that I thought was a good idea? No. The chances of recovering and defamation anything are extremely small. They're hard cases to prove. There's always the opinion exception to the defamation cause of action, which says, like I intimated earlier, owners have the right to express their opinions. So in order for defamation to really fly, there has to be a patently false statement that they knew was false when they said it, was published to a third party, which means anybody other than the association and themselves, so on a website, you probably have that per se, and then there have to be damages. That's the tricky part is reputational damage for an association, how do you prove that? So a lot of defamation cases will go to trial and they'll come back with a dollar verdict and just to prove a point that yes, defamation occurred. So usually not a great idea.

Now the cases where we do see defamation being useful and a tool worth expenses, when you do have that owner who puts up their official, "I'm the association," website where they're posing as the association and they start doing things that intentionally interfere with your business relationships. Your landscaper says, "I saw what you said on your website, I don't want to work for you anymore." Those are the type of things where you can sort of start to get involved with defamation. But otherwise, what we see most common there is an owner talking about an individual director. When that happens, we actually want those individual directors to retain private counsel because it's their reputation at hand. As counsel, we represent the association, and generally, our purview doesn't extend to those individual directors. So if an owner is going out there and saying, "Hey, director John Smith is just this jerk, he killed my cat yesterday and you should never work with him," well, all right, if that's untrue, then that director probably has grounds to go out and address that with the owner privately.

Alan Tannenbaum, Esq.:

It would seem that underlying a lot of this is really the disruption of the normal business practices and operation of the association. We've had associations where they've had two management agents leave because that a particular owner or a few owners were making life intolerable for the manager. They'd show up even at the office on a daily basis with some sort of physical intimidation. We've had a couple of instances where we're maybe now on a third in management agent or a management company decides to fire the association because it just doesn't want to put its employees in harm's way, and that's when it would appear there's really a need for the association to take action to really protect its business operation from being really negatively affected. Maybe even interference with contract would be a cause of action that would be possible under those circumstances. So that's where some action is needed. Is there questions that any of you are saying?

Cindy Hill, Esq.:

Well, Alan, I'd like to address, I've seen a couple of questions about what to do if the board member's a bad player, so to speak, that if you have a board member who's disruptive, who's making demands, who's not necessarily being physically threatening, but making it hard for the board to conduct their business, that's a really tough one, because board directors have more authority to. Obviously, they have a right to speak at board meetings. It's not limited in the way that owners speak. Board members have a right to ask questions at board meetings and be part of decisions in a way that owners are more observers. So when you have a bad player board director, it's really a tough situation.

One thing to keep in mind, though, is to the extent that board members are elected by the owners, they can also be unelected, so to speak, or recalled by the owners. So if it is obvious to enough owners in your association that you have a board member who's more disruptive and less helpful and could be replaced by someone who'd be a better board member, if you can get a majority of the owners to agree to a recall, that board member can be removed by basically a reverse election. That's not necessarily the best option, but it is very difficult when you have board members who are disrupting meetings because they do have rights beyond what the owners have, generally.

Alan Tannenbaum, Esq.:

Yeah. We had one association where somebody running for office basically said that if the current board didn't resign that they were going to file a lawsuit against them and take all their assets. We saw a couple of current board members saying, "Look, this is a volunteer position. I don't need this harassment. I'm certainly not going to put my asset picture at risk," and they decided to resign from the board, allowing this challenger to basically take control of the board, which was unfortunate. But a lot of particular situations are very, very difficult to navigate. So we've hit the noon hour. There's a lot of questions on business records maybe that we need an entire session on that that I see and some more on requesting association documents. But I think that we have basically covered most of the questions that we're able to answer in this session. So we're going to say goodbye for the day. Thanks for attending. Hope that it was helpful. You've pointed out some additional topics that we need to take on, and we will see you next month.


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Smart Board & Property Manager Legal Guide: The Limits of Fining Authority & How Best to Implement

Alan Tannenbaum, Esq.:

... everybody. This is Alan Tannenbaum of Tannenbaum, Lemole & Hill. I'm here with my partners, Cindy Hill and Jon Lemole, and also Jim Turffs. Destiny Small, I believe, is on assignment out in the field and she may join us. Today's Smart Board is on The Limits of Fining Authority and How Best to Implement. Cindy and Jim, who are the principals in our community association general practice, general counsel practice, are going to lead the way as we go through these topics. It's not a CEU for your managers. Sorry, we didn't get that approved yet. Send your questions through chat. We're going to mute everybody. We will try to get to as many questions as possible, and we will even go on after the noon hour if there are additional questions that need to be answered. We'll stay on and answer as many questions as we can.

So here's the agenda for today. We're going to cover statutory fining provisions, when is fining appropriate, fining process, what happens when fining doesn't work, and alternatives and pre-suit mediation, and then circuit court enforcement if it ends up being necessary. We're going to start off with Cindy's going to discuss what's required by statute, which she'll indicate sometimes differs with what your documents say and it's a matter of which one governs. So Cindy, take over.

Cindy Hill, Esq.:

Thank you, Alan. In the chat earlier before we began the presentation, I heard some successes, some frustrations, and some confusion. So we're going to hopefully help address some of these issues starting with, first of all, this focus is on condominiums and HOAs. So we're not going to discuss co-ops. We don't represent co-ops, but I will say if you are in a co-op, generally, the condominium laws are going to be very similar to the co-op laws.

So fining is a statutory process. It's actually an unusual right to have. You think of a fine, it's usually more something that the city does or a governmental authority does. HOAs and condos are not governmental authority entities. They're not for profit. So it's not surprising that the statutes primarily control how you implement fining and what you need to do with the steps you need to take.

So for condominiums, the statute on point is 718.303, and for HOAs, it's 720.305. We can, of course, put those in the chat if somebody didn't get them when I said them, but they are two different statutes, but they are substantially similar, which can get confusing. So under both statutes, condo and HOA, fines can be levied for violations of the declaration, be it the declaration of condominium or your declaration of covenants for an HOA. For the bylaws or for, it says, reasonable rules, which means that you can fine for your rules and regulations with the caveat that if the rule is found not to be reasonable, that could be an issue.

So who can you levy fines against? For a condominium, the statute says owners, occupants, licensees or invitees. Licensees and invitees is getting pretty legal there, but owners and occupants is pretty clear. You can find the unit owners, you can find their occupants, and a tenant is an occupant. For the HOA statute, it specifies members, the member's tenant, guest or invitee. So again, you can find the owner member, you can find their tenant, you can find their guests.

Generally, it is owners that are fined because they are generally responsible also for the actions of their tenants and guests, and it can be easier to collect or seek enforcement from an owner who is part of the community. That being said, there are situations where tenants can be appropriate to direct themselves as opposed to the owner or fine both. Now, these are considerations you can look into when you're considering fining.

Now, one of the biggest questions I get about the fining process is how it has to work. Under both statutes, you have to start with the board, meeting at an open meeting with the property on the agenda to decide whether or not to levy the fine. Now, what does that mean? The board has to decide at that meeting on the property at the issue what amount they want to vote to fine the property. We'll go into amounts a little later here. Then it is the job of the fining committee, the hearing committee, the grievance committee, whatever you want to name that committee, just that committee, to then have a hearing at which to decide whether or not to impose that fine that the board levied. So you have to follow a two-step process, and the board meeting has to be noticed.

So I get a lot of frustration from communities about, "Well, why do we have to go through this process? It's burdensome. It's cumbersome. People might fix things in the interim." All I can say to all of that is I understand what you're saying, but the process is statutory. If you don't follow the process per the statute, your fines are not worth the paper they're written on, and if someone can test them in a court of law, you could very well lose. So those are the two fundamental parts of the process.

A little further down, Jim Turffs is going to discuss in more detail the process, but that's just fundamental to understand that you have to have the board start the process to levy the fine and the committee meets for the hearing at which the owner can come or not come. Regardless, the committee makes their decision at that hearing whether to impose the fine. Again, we're going to go over this a little more in detail, so bear with me.

What amounts can you fine? If you're in a condominium, it's quite clear, up to $100 a day or $1,000 in the aggregate for a continuing violation. That's it. Jim is going to discuss and we'll discuss later whether maybe you could also start the process again and refine, so to speak, but for the actual fine process as it's set up, it's $100 a day, maximum I should say. It doesn't mean you have to charge $100 day. You can fine for $25 a day if you want, but 1,000 is the aggregate that you can reach maximum.

For homeowner associations, they also have up to $100 a day, but it also says that a fine can exceed $1,000 if the documents say otherwise. So for homeowner association, that's a document-driven question. Do your documents authorize a fine greater than $1,000? That's something that you'd have to get with your counsel to answer, but there is a possibility if you're an HOA that you could fine in the aggregate for more than $1,000.

Here's the second level of frustration I hear from my associations wanting to fine, "We can't get any volunteers for the fining committee." Well, unfortunately, the statute dictates very clearly for both condominiums and homeowner associations that you have to have at least a three-member committee, at least three. Doesn't mean you can't have more, but you've got to have three, and the members cannot include officers, directors or employees of the association, so board directors cannot be on the committee. Managers cannot be on the committee. Your handyman cannot be on the committee.

The statute also prohibits the spouse, parent, child, brother or sister of an officer, director or employee. So the wife of the board president cannot be on the committee. The sister of the treasurer cannot be on the committee, and the spouse of the handyman cannot be on the committee. So this can make it challenging. I do understand that, particularly since people don't necessarily want to play what can be considered a rather mean role against their neighbors, but the statute is very clear. If you do not have the right volunteers, again, you are not following the fining process and your fines are going to be legally challenged and lose on procedure. So if you cannot get the volunteers, the answer is, unfortunately, fining is not going to be an option.

So returning to the fining rights in governing documents as opposed to what's in the statute. Again, condominiums do not have any discretion with the amounts that they can charge. It's $100 a day, $1,000 in the aggregate. It doesn't matter if your documents were from 1973 and say otherwise. The statute controls. That being said, there are always exceptions, but I'm going to go with the statutes going to control.

For HOAs, again, there's the option to fine an excess of $1,000, and there's the further option in the governing documents that HOAs may be able to lien. That's something we're to discuss a little later, lien for a fine. That being said, the extent that some of you might be getting a little excited about how you can implement some punitive fines, so to speak, that are pretty excessive or maybe a lien on the property, you want to step back and think about that because the higher the lien, the more controversial the lien, and if you put a lien on a property for the fines, you are more likely to have a legal contest. So there's a balance there. Fining is meant to discourage acts, not meant to pad the coffers or the association. Fining is meant to encourage people to behave, not to put them in a financial hole necessarily. So these are considerations we're going to discuss as we proceed.

So when is fining appropriate? That's a question, I think, we could probably spend an hour and a half on, but I'm going to give some examples. Smaller violations, first-time offenders, the idea being that a threat of a monetary penalty will make poor or careless behavior less appealing, such as, for instance, there was a gentleman mentioning that people were not putting their trash in the trash compactors, they were apparently leaving in the hallway or next to whatever the facility was. That's pretty lazy careless behavior, and if you start fining for that, people may just well stop that. Parking violations, people using the 20-minute guest spot for their lunch hour. People parking in someone else's parking space when they know they shouldn't do it. Removal of unsightly items from a yard or an entrance way, finings can be incentive to do that. Yard maintenance is a big one. Dirty roofs is another one I see. For larger communities, picking up of dog waste is even something I've seen fining for.

Fining can also, regardless of what the violation be, maybe get the attention of a remote owner or a bank-controlled property. Someone who's inherited or the bank takes ownership, they may not pay any attention to violations until they start to see some monetary penalties. Now, fines are not as useful for larger violations, particularly the ones that are going to be quite expensive to fix, like unapproved structural changes such as a roof replacement. Maybe you have a requirement, they have to have a very tall roof in your HOA and somebody put on shingles. I don't know that a fine is going to fix that. New windows that don't comply, permission wasn't given, unapproved fences. You might think, "Well, fences, that's not terribly expensive," well, price out fences go to Lowe's, particularly the tall vinyl ones are very expensive.

Another risk you have with fining is I've seen situations where someone thought if they pay the fine, they get to keep the violation. For instance, painting your garage door an unapproved color. You fine the owner for doing that and then they pay the fine and they're like, "Now I can keep my color, right?" Well no, that's not how this is supposed to work. So that's another consideration.

Also for fines, if you have a repeat offender and you keep finding that offender and you're not getting anywhere, you may very well need a stronger approach. So with those short guidance on how to consider a fine, whether it's appropriate or maybe not, I'm now going to turn it over to Jim Turffs to give his thoughts on that process as well.

Jon Lemole, Esq.:

Cindy, Jim, Jim, before you jump in there, I've noticed a couple of questions in the chat and I think the gist of the questions is the distinction between fining, let's say, and levying for damage that may have been caused by somebody. So let's suppose somebody causes some damage to a common area or a common element. Can you explain a little bit? I would assume that that kind of a damage claim wouldn't be subject to the fining process, but I want to be clear on whether that's accurate or not.

Cindy Hill, Esq.:

Yeah, thank you, Jon. If that's a question that's coming up, that is an entirely different distinction. If you have provisions in your documents that say that owners are going to be responsible for damage to the common elements or common property created by their negligence or their failure to take action, that is not the same process as what I just discussed here, which is fining. Those are going to be costs related to the fix for whatever that problem is that the association has to spend its funds, and those are not going to be limited by these financial restrictions for fining or require these due process provisions that are statutory, but the documents for each community are going to govern what you have to do in those scenarios.

James "Jim" Turffs, Esq.:

All right. Well, I'll jump in now and start talking about the fining process itself. I'm going to double down on some of the stuff Cindy had said. We've already coordinated. We're going to repeat a few things today because some of the information is that important and really needs to be emphasized that often. On the other hand, I'm also going to gloss over some things. I have about 10 minutes here to talk to you about a very detail-oriented process, so not going to get into the absolute minutia of everything, but I want you to be aware of some of the general pitfalls that come up when we talk about fining.

So for the fining process itself, it actually starts with the original violation letter. Before you even think about fining, you have to let the owner know that they have violated your governing documents in some way, and that's your traditional violation letter. Everybody should be familiar with that at this point. You're going to see a common theme in all the notices related to fining in that they all have to describe the violation, they should all describe the specific provisions of the declaration that are being violated by that act, and they're all going to have to explain how the owner can cure that violation and come into compliance with the governing documents.

So that also starts at the violation letter itself. It needs to be pretty specific. The owner needs to know exactly what they've done wrong, how they can cure it. Another key part of that initial violation letter, if you're thinking about fining, is going to be including a threatening paragraph at the end that explains all of the possible outcomes if they don't do what you're telling them. So in this case it would say, "We can also levy fines against you if you don't comply with our demand here within 5, 10, 15 days," whatever the deadline is.

So after you've told them what they've done wrong, you said, "We might fine you if you don't fix it," you've given them the chance, the explanation how to fix it and everything, they still haven't done it, so you move on to the actual fining process itself. I would point out real quick that some declarations provide a specific deadline for compliance. So it says if an owner is violating the governing documents, they shall have five days to cure. That can be superseded if they can't reasonably cure the violation in that five-day period or 10-day period, whatever your documents say.

So if you're violating somebody for saying, "You've landscaped your lawn completely incorrectly. You're going to have to tear that whole sucker out and replace it," they're not going to do that in five days. So the cure time also has to be a reasonable period to cure. So keep that in mind when you're doing that.

So at this point, like I said, the violator has not cured their violation. You threatened them, they say, "Screw you," whatever they're doing, they're not going to fix it. So you come back and the board then conducts a meeting, as I think Cindy pointed out. The board decides what the fine should be and recommends it to the fining committee. The fining committee then is responsible for setting a hearing date for that and providing notice to the owner at least 14 days in advance of the hearing that the hearing is going to take place. That 14-day period is critical. A 13-day notice is going to invalidate your fine. So get at least 14 days in and there's nothing wrong with giving more than 14 days, 15, 16, 20 days. Give whatever you'd like but make sure you're at least giving 14 days notice before the hearing.

Now, the notice of hearing, as I said earlier, is going to contain that same information as your notice of violation. It's going to explain, "Here's what you've done wrong. Here are the provisions you've violated. Here's what you have to do to fix it," and in addition to all of that, your notice of hearing is going to say, "A fine has been levied against you for," whatever, "The board has recommended a fine against you for," whatever amount. "You have the opportunity to appear at this hearing in at least 14 days from now." It'll have the date, time, and location of the hearing.

You can present evidence. Again, this is all the contents of the letter. So the owners can present evidence. They can appear with or without an attorney, and under a recent modification to the law, now they can also appear via electronic means as well. So you can't necessarily constrain them to an in-person hearing. So again, you have that extra variance now.

Once they show up at the hearing, again, they can be there with an attorney or without. They can explain why they shouldn't be fined. There were questions in the chat also about the composition of the fining committee. I wasn't going to get too deep into that, but since it's been asked, the fining committee can't be board members and it can't be close relatives of board members. So the statutory language itself is that the committee has to be at least three members appointed by the board who are not officers, directors or employees of the association or the spouse, parent, child, brother or sister of an officer, director or employee. So I saw a question about a live-in companion. If they're not married, if they're not blood related, that live-in companion may very well be able to be on the fining committee as long as they're actually a member of the association, which is going to be a trick there.

So now you're at the fining hearing and the owner's there. Let's say they didn't show up with their attorney. They put on their evidence. Then it becomes the fining committee's choice to deliberate and decide whether or not to approve the fine that was recommended by the board of directors. They can consider all of those facts. The owner says, "Hey, I was out of town. I didn't get your notice until yesterday. I'll absolutely fix it. Give me five more days." The fine committee can, within their discretion, say, "Fine, we're not going to levy it. Go fix it. We might be back here in another 20 days or so, but sure." Alternatively, the board can say, "That's no excuse. You knew this was wrong when you did it. We're going to approve the fine." That pursuant to the statute is where the fining committee's authority ends, approving or disapproving that fine.

So after they've made that decision, again, if they say, "No fine," great, nothing else needs to happen. There's no fine. Everybody goes on their merry way. If they do approve the fine and levy it against the owner, another notice needs to go out, and surprise, surprise, this notice also needs to include a description of the violation. It needs to include a description of what the owner can do to cure, if that's still available. Sometimes you're past the cure point. This is a punitive fine instead of a coercive fine. Maybe they can't cure it, but if they can, it needs to be included in that notice as well.

Very importantly, that post-hearing notice also needs to include a demand for the owner to actually pay the fine. It's what we call the five-day notice. It says, "Okay. A fine has been levied against you in this amount for this reason. It was $100 a day for 10 days. It's $1,000 fine. You now have to pay that fine within five days." That's what really triggers the owner's obligation. If you don't send that post-hearing notice, that fine doesn't really become due. So it's very key to get that post-hearing notice out so you can trigger that right to pay.

Jon Lemole, Esq.:

Jim, when does the fine run from? When does it actually start?

James "Jim" Turffs, Esq.:

So fines can apply, I don't want to say retroactively necessary, but it can apply to the date of the violation. So let's say somebody left their garbage cans out in violation of the governing documents for four days or let's make it longer. Let's say 10 days. So you sent a violation letter saying, "Get it back in." They didn't get them back in and the violation kept continuing. So the fining committee meets and they can say, "Well, the garbage cans were left out on January 1st, left them out until January 11th, so that was a 10-day violation and we're going to levy a 10-day fine for that because they're repeat violator. They knew they shouldn't have done this," whatever reason, but they approve a 10-day $100 fine for that. So it's thinking about it as retroactive. It encompasses the actual dates of the violation of the fine. Does that answer your question or-

Jon Lemole, Esq.:

Yeah, it was a question in the chat. Does it start running from when the board recommends it or does the fining committee have discretion to determine amount, time period, and so on and so forth?

James "Jim" Turffs, Esq.:

Yeah, and we can also infer that from the statute as well because as you look at those requirements and all of these notices about providing notice of what the violation was and how to cure, they start to use that caveat in the language saying, "And you have to explain how the owner can cure the violation, if that's still possible."" It's because often they may have already cured the violation and maybe this is a punitive fine rather than a coercive one, and so it can be retroactive in that sense.

Alan Tannenbaum, Esq.:

Jim, there's a question. In one association, we have a repeat offender smoking in the common areas, breaking Florida Clean Air and condo rules. Would like to know if you have to have a photograph of the person breaking the rules or would presenting witnesses be enough or are witnesses even required? What's the standard of proof for the fine committee?

James "Jim" Turffs, Esq.:

So it's not like a criminal court case where it needs to be beyond a shadow of a doubt, but the board does need credible information to rely upon. Certain violations can be independently verified by the board. So a landscaping violation, for example, the board can drive past, see it, and they can independently verify so you don't need owner involvement, but if it's going to be something that the board can't independently verify like a smoking violation, like you show up and there's nobody there anymore, then yeah, you can rely on other owners' complaints, but after a point, those owners need to be willing to step up, identify themselves, and affirm that, "Yes, this is what I saw. Yes, I reported it. I'm standing by it. I say you did this." So there needs to be something credible for the board to rely upon, but there's not a specific standard like reasonable doubt or preponderance of the evidence like we would use in different types of court cases.

Alan Tannenbaum, Esq.:

So the proof is presented to the board. Does the fining committee also take evidence?

James "Jim" Turffs, Esq.:

Yeah, at the hearing, again, they are perfectly welcome to entertain anything. They're even more broader in what they can entertain than what a judge would. So again, they'll take testimony from the owner who's violated. They're welcome to put on their case. They should have the information that the board relied upon if it was a written complaint or whatever it was in front of them. They should have the basis for the complaint to start with. At that point, if another owner wanted to appear and testify, they could, though that's not strictly required.

Alan Tannenbaum, Esq.:

There's another question about whether at the fining committee hearing the fining committee can change the amount that the board has assessed as a fine.

James "Jim" Turffs, Esq.:

My interpretation of the statute is no, they cannot. The statute to me reads as the fining committee can approve or disapprove the fine. That's the extent of their authority. I know other associations and even some other lawyers might suggest that the fining committee can levy something less than the full fine authorized by the board. I don't agree with that. I'm not saying they're wrong, but that's not the way the statute reads, and in this case, I think you have to strictly read the statute.

Cindy Hill, Esq.:

If I could come in here, there's some questions that are similar in that the statute's not entirely a model of clarity regarding notice. I've seen some questions about, "Do we have to notice the fining hearing?" It's my position that, yes, you do have to notice the fining hearing and that you should notice it in the same manner you would a board meeting, but there may be something in documents that say otherwise. Some people who practice in this area of law disagree because the statute is not specific on that point. I just don't see a reason why you would want to tell a judge, if it went to court, why you didn't notice it to the community.

I also want to raise, board members will attend these hearings in my experience, and if more than a quorum of the board attends, you actually technically have to notice that as a board meeting as well. So you run into some problems. Also, having board members attend can look potentially intimidating perhaps. There's some nuances to some of these questions, which is why you're not necessarily getting just some very black and white answers in the chat.

James "Jim" Turffs, Esq.:

I'll even double back down on Cindy's first answer there about noticing the meeting. Assuming your governing documents don't talk about it, the statutes obviously don't, but if your bylaws have adopted Robert's Rules of Order, Robert's actually does say that committee meetings should be noticed in the same fashion as director meetings. So that's where I would fall back to. Again, I agree they should be noticed and made open meetings so that other owners can attend, it is an open process.

Alan Tannenbaum, Esq.:

There's a question and really for Jim and Cindy. For somebody who's a consistent violator, so let's say they do a violation, you go through the fining process, and then it's now three weeks later and they're committing the same violation. Is it possible to go through the fining procedure for a second time and not be outside of statutory requirements?

James "Jim" Turffs, Esq.:

Yeah, absolutely. The statutes have a 10-day limit to fining. Again, that can be modified to some degree by your governing documents, by amendment if that's been done, but assuming the statutory base, you can levy a 10-day fine, and if the fine goes on for 20 days, as long as you go back through the notice and hearing process again, you can levy a second fine for the next 10-day block. You can continue that essentially ad nauseum, but do you really want to? If these people are incorporating all these fines, there comes a point where you draw the line in the sand and say, "Hey, fining isn't working," and as we'll talk about a little bit later in the presentation, maybe some other options need to be considered.

Alan Tannenbaum, Esq.:

There's a couple of questions about getting participation for this fining committee. One was from a small association that has difficulty getting people, and what if they can't get three volunteers to be on a fining committee? What are the options then?

Cindy Hill, Esq.:

Well, I'll take that one. Jim, I'll give you a moment to take a breath. The statute is clear, at least three, period, for condos for HOAs. If you can't get three volunteers who are members of your community, members of the association, then you're not going to be able to implement the fining process. I know that's frustrating, but the statutes say with the statutes say.

James "Jim" Turffs, Esq.:

All right. In that case, I've wrapped up. I got to the five-day notice after the hearing, which is what triggers the actual effectiveness of the fine. So beyond that, I'll pass it on over to Cindy for the next section.

Alan Tannenbaum, Esq.:

All right. Cindy's going to cover what happens if fining hasn't worked or the owner hasn't paid. Now what?

Cindy Hill, Esq.:

Before we get to that, I do want to back up and point out, and some of the comments before the presentation started, someone mentioned that suspending owner rights was really working for them as opposed to fining. There is a process both in the condo and the HOA statute, it's in the same statutes as the fining process, where you can potentially suspend for a reasonable period of time, whatever that is, the right of owners and their guests and tenants to use the common elements until the violation is corrected. That is an option. It follows the same process we're talking about here with a fine though. You also have to have the board implement the suspension and then you have to have a committee that imposes a suspension. That's an option. That seems in my experience to work very well if you have a community where people are renting out their property for tenants to enjoy the facilities, the pool, maybe the beach access, what have you. So that's another option to consider with your counsel.

Alan Tannenbaum, Esq.:

Before you go further with that, can the fining committee, does that have to be a separate committee or can that be the fining committee that's also doing that process?

Cindy Hill, Esq.:

That really is the fining committee because that's a good point to bring back to the table, Alan, is the statute says committee. It doesn't call it a fining committee, a hearing committee, a grievance committee. It is a committee. So that committee can suspend, it can fine. An association, if it wanted to, could have two separate committees. I don't see any prohibition on that, but absolutely, can be the same group of three people who are that committee.

Alan Tannenbaum, Esq.:

The initial letter that goes out to the owners would have to indicate that there would be a possible suspension of their rights to use the amenities and so forth as one of the sanctions for the violation, that would have to be in the letter.

Cindy Hill, Esq.:

Yes, just like the letter would say if you were going to fine instead that, "We are going to find you," the letter would say, "We are going to potentially suspend your rights." Again, you would want to have for the board meeting where they would decide that first and the committee would follow up, you'd want to have that property on the board meeting agenda. There are a lot of boxes to check in this process if you haven't already picked up on that listening in. If you don't check those boxes right, again, you can lose the ability to enforce what you have.

The negative to the suspension is, I mentioned earlier, what is a reasonable period of time? Can you suspend somebody from the use of the pool for six months because they didn't pay $100 in past due fees or because they keep parking in the guest spot? These are questions that have to really be weighed out on a case-by-case basis with your counsel, but I do want those who are listening to know that that is an option and some committees are using it successfully.

Jon Lemole, Esq.:

Does it go back after the fining committee meets and makes its decision? Does it go back to the board for final approval? That's one question I'm seeing, and the other question I'm seeing is that, can the board decide to do something other than what the fining committee has decided?

Cindy Hill, Esq.:

That does not go back to the board. I'll start with the easy part of that. Once the fining committee has made its decision, the owner is then told of the decision, the owner or tenant, whoever was fined, and there's a new provision actually in the HOA Act that now requires the owner or tenant to be sent a detailed analysis of the findings of the committee, why they were fined, what they can maybe do to fix the violation if it's continuing. There's actually a process there we didn't even get into because, again, as Jim was saying earlier, there's very detailed steps to this process. As for whether the board could then decide to, let's say, renege the fine, that's something the statute doesn't really address in terms of maybe there could be a rehearing, so to speak. I wouldn't know how to advise on that without really special circumstances, but as a rule, once the fining hearing committee has made its decision and implemented the fine, the notice goes out to the owner and the owner has five days to pay. So it's a pretty strict process.

Alan Tannenbaum, Esq.:

All right. Cindy, let's get into our topic number four with the fining has an induced compliance. What are the possibilities?

Cindy Hill, Esq.:

Well, you can also suspend use rights if they haven't paid a fine, just like if they haven't paid a fee, an assessment. For condos, if an owner is more than 90 days delinquent and paying a fine a fee or an other monetary obligation, suspension of use rights can be imposed. What's interesting about this option as opposed to the one I just discussed is the statute's clear you don't have to have a fining committee, hearing committee for this process. This is strictly once someone is more than 90 days delinquent, the board can send out the notice. The board has to make the decision at a board meeting just like everything a board does, but you do not have to have a committee who is the second step of the process if you are suspending use rights for the failure to pay a fine or other monetary obligation, and that ends when the monetary obligation is paid in full.

So if you do suspend someone's use rights because they haven't paid a fine and tell them they can't pay the pool, if they pay the fine, their rights are automatically reinstated. This is the same also for HOAs. The suspension ends when the person pays and, again, the 90 days for that as well. There's also an option, because the legislature apparently really was into suspensions at some point, to suspend the voting rights of an owner for non-payment of a fine or other fees or other amounts due. In a condominium, you can suspend the voting rights of an owner if they've not paid a fee or fine, which is both, now here's where it gets a little trickier, both more than $1,000 and more than 90 days delinquent. So if you fined someone $100 and they haven't paid it in 90 days for a condo, you're not going to be able to suspend their voting rights. You have to have that $1,000 plus the 90 days.

For HOAs, they don't have that $1,000. They can suspend voting rights for any fee or fine that is more than 90 days delinquent. Again, both of these suspensions for voting rights are also ones that don't require a committee or a hearing. They are imposed financially. So the way to distinguish that easily is to remember, when someone has a financial obligation of fine, an assessment, a fee, whatever the charges they're not paying, you don't have to have a hearing for that. If you think about it, it makes sense. If someone hasn't paid, they haven't paid. You don't really need to have an evidentiary discussion. If for some reason someone's check got lost in the mail or replied wrong, there's opportunities to correct that without having a formal hearing. So those are both options for if someone doesn't pay a fine.

Again, for condominiums, you cannot lien for a fine. You can't do that. So that's not an option for you. You don't do that condo. For HOAs, you may be able to lien for the fine. That might be in your document. So that might be a process you can look into and then follow the lien collection process like you would for an assessment. Again, the question keeps coming up, "Can we do a redo? We do the 10 days, fined them and they don't pay. Can we do it again?" As long as the violation's continuing, as Jim was saying earlier, yes, you can do that, but at what point is that hassle worth it? If someone is just refusing to pay fines, is redoing it going to change their mind?

I also saw a question, "Can you only redo it once a year?" No, there's no limitation like that. If you're going to redo a fine, you just have to follow the process that you did the first time and confirm that the violation is indeed continuing because, obviously, if they fixed it, you can't continue to fine.

The last option without getting into the pre-suit mediation and courts is what you can call self-help. Can an association basically go onto the property and fix the problem themselves? There's some real risk in doing that and being accused of trespass and maybe damaging other property owned by owners. So this is not the one you want to start with. This is maybe the one you never want to do, but it is potentially an option in certain scenarios. It can be recommended for a safety or urgent concern, but that's likely to be more of a maintenance repair situation than fining what we're talking about.

I do see in HOAs and some land condominiums as well provisions where an association has a right to come in and mow or landscape work on the property and impose a fee for that. So self-help doesn't really help as much with what you would be fining for, I would say, but it is worth discussing with your counsel if you're having particularly a vacant property, bank-owned property where you're just not getting any traction. So Jon, Alan, what are you seeing questions in the chat that are coming out of what I just dumped on everyone here before we turn it over to Jim?

Alan Tannenbaum, Esq.:

Well, I think one of the things that you may have covered, but there's a question. If a resident cures a violation by the time the fining hearing occurs but not by the due date, can the fining committee throw out the violation and just let the residents slide with no fine at all? So I think the question is after the board has acted, goes to the fining committee, does the fining committee have the discretion to not fine at all or fine in a lesser amount because in the interim there's been compliance?

Cindy Hill, Esq.:

The fining committee absolutely has the discretion to choose not to fine. Absolutely. As Jim was saying earlier though, I agree with him that the fining committee does not have discretion to change the amount the board levied because the statute is very clear that that's the process the board starts with. The board sets that monetary amount. What the fining committee has the right to do is take or reject that amount, and depending on circumstances, that's their decision to make, almost like a jury to a certain extent.

Jon Lemole, Esq.:

There was a question. Can a fining committee meet solely via Zoom? I know that there's a provision now that the owner can request it, but as a matter of starting it off just as, "Hey, we're only going to meet via Zoom, period." Is that possible?

Cindy Hill, Esq.:

I can't tell you that the statute authorizes that. There are some associations that have some updated documents that have some provisions regarding Zoom rights. So there may be something in your documents, whether you're condo or HOA, that would authorize that, but the statute does not say that you can have them only via Zoom, and only the HOA statute says that owners or tenants who are going to be fined can appear via Zoom. So condos don't even have anything about Zoom in their statute. So that's a risk.

What I tell clients generally when they want to do something only Zoom, I say, "Well, go ahead and notice it at a physical location as well. That way you have a physical location where people can come, and then if people do want to watch via Zoom, they also have that option." I do understand Zoom has gotten very convenient, but the statute is not up-to-date on all those options.

Alan Tannenbaum, Esq.:

I know there was a question about if the association's attorneys involved in the violation process, can the legal fees be charged to the unit owner?

Cindy Hill, Esq.:

Jim, you want to take that one?

James "Jim" Turffs, Esq.:

Generally not. Your governing documents may be able to tweak that and maybe can make the costs of enforcement collectible, but not by statute. The statute doesn't incorporate passing attorney's fees on for the fining process. Cindy might have some more comments about that.

Cindy Hill, Esq.:

Yeah, and I was going to say I agree with that. I was deferring to you with your litigation experience, but my take on it has been the same, that there's nothing in the statute that says that you can include attorney's fees for that. I would add to that, if you're involving the attorney heavily at that point, maybe the other options segueing into what we're going into now, the pre-suit mediation and pursuing in court, are the better alternatives.

Alan Tannenbaum, Esq.:

Cindy and Jim, there's a question. Apparently, there's an association that has preset fines for certain violations. Does the board actually have to direct a specific fine for a violation or if there's a preset schedule, can the fining committee just apply that specific schedule?

Cindy Hill, Esq.:

I want to open that question with there's a lot of disagreement amongst community association council on that. I know counsel who say, "Absolutely no preset ever. It is not contemplated in the statute. Don't do it." On the flip side, I hear counsel say, "Well, if you have a lot of violators like, for instance, a large community with a lot of tenants, and not to pick on tenants, but they do tend to have less interest in the value of the property than the owners, but it can also be owners of a large property where there's a lot of violations like with trash, with parking, with dog feces, that having those schedules can be helpful in terms of the board can say, 'These properties we're going to be imposing a fine at the schedule provided that we've already agreed to, $50 a day for dog feces, $50 a day for trash.'" So that's really one you have to discuss with your council, whether it's going to make sense for your community, and your council's also have to be prepared to back you up if someone challenges it because it is not clear in the statute that you can do that.

James "Jim" Turffs, Esq.:

I will say my preference on that, as she said, there's two schools of thought, but I prefer not to have set fines, at least not published, have to, "This is what we're going to charge for that fines." The statutes, I think, contemplate a more case by case basis analysis. Again, the fining committee has the option to take evidence to a degree, though they can't modify the board's fines. So if you're in a big community and if you want to have some schedule of fines, I would suggest it be far more informal just like, "Hey, for the fining committee, we have a recommended, suggested," all of these quantitative flowery words in there about why these aren't binding but recommended fines, and then that will allow, I'm sorry, the board that will allow the board to deviate from those a little bit more should somebody be more of an egregious violator or something that was purely accidental.

Jon Lemole, Esq.:

Here's an interesting question I just saw going back through the chat. The fining committee has to be a committee of at least three. Does that mean all three have to be present at the fining committee meeting or is there a quorum? Are you allowed to proceed with a quorum of two as long as you have three on the committee?

Cindy Hill, Esq.:

Jim, I don't know what your take on that, but mine is it says at least three. It doesn't say a quorum.

James "Jim" Turffs, Esq.:

I agree, and that's for the reason that if you try to do a quorum thing, you're going to have to and then you're going to have stalemate fees, and the statute, again, doesn't handle what to do if you have a 50/50 split on a fee decision. So I don't think there should ever be a circumstance under which you have an even number or have to deal with a quorum like that. So I think it has to be at least three and, really, I think should go on to say always an odd number because, again, it doesn't tell you what to do if there's a deadlock.

Cindy Hill, Esq.:

That's a good point.

Alan Tannenbaum, Esq.:

Pre-suit mediation.

James "Jim" Turffs, Esq.:

Stepping on your toes there, Alan. I'll moderate for you. So pre-suit mediation, so we've been through this fining process. We've sent the violation notice. We've sent the notice of hearing. We've had the hearing. We've sent the notice of determination of the fine and the five-day demand to cure. Your owner still isn't doing it. They're still violating. It's going on and on. You have $10,000 of fines against these people. What do you do? Well, fining isn't working. You got to move on to something else. For most violations, that's going to be the pre-suit mediation process.

So pre-suit mediation is important. It's required by statute because even though you're governing documents in chapters 718 and 720 all say, "Oh, the prevailing party in these enforcement lawsuits gets their attorney's fees paid." Well, the pre-suit mediation demand has now been kicked in, and it says that if you don't go through that process, at least try, then you're waiving your right to collect your attorney's fees and costs even if you win. So you at least have to go through the steps. You have to make the effort. Sometimes mediation doesn't practically happen, but, hey, you need to go through it.

So precinct mediation, like everything else, starts with a letter. You've already sent the violation letter out. They haven't done it. Their cure period has lapsed. They're still violating. Whether you fine or not, you determine that litigation is really what you need to do, so you send the pre-suit mediation letter. Pre-suit mediation letter contains the exact same information all those other notices does, "Here's the violation. Here are the provisions you violated. Here's what you had to do to cure. You haven't done it. So now here's a list of mediators. You can pick one or you can suggest other mediators. Come back to us within 20 days from the date of this letter with the mediator you've picked, and we're going to go and we're going to sit in front of them and we're going to mediate this."

So mediation itself, which I think we may have talked about briefly in a previous presentation, is the option to have a board member or the entire board, somebody who has the authority to act on behalf of the board, whether that's one director or the entire board, whatever, shows up. The owner, owners show up, and this is a process that the association's always going to have a lawyer for. The owners may or may not have a lawyer for. The last two I did didn't have counsel present. The mediator will explain the process to them, and that process is that it's an opportunity for both parties to speak to each other directly in a less formal setting, explain, "Hey, these are the rules. We're doing our job. We're enforcing the rules. If we don't enforce the rules, they go away," as the board would say.

Then the owner says, "Well, the rule is vague," or, "We don't agree with this rule," or they explain that, "Hey, this is overreaching." Then you can either work together or split apart. The mediator acts as a translator, going back and forth between both parties trying to explain what's going on. The hope is to reach a settlement agreement, basically a contract that says both parties are going to abide by these terms and that's how we're going to fix the problem.

There are great benefits to mediation. It allows for you to be very creative. If you take a matter like this in front of a judge, let's say an owner has built a shed in their backyard that's inappropriate, for whatever reason, it violates the governing documents. You can consider a thing, you take it to court. A judge is just going to say, "Tear it down," or, "Pay this amount of money," assuming funds for the association. Via mediation, you can consider a lot of different things like concealing the shed, splitting costs for the demolition of the shed. You can get more creative. You can consider things more than just black and white or money or not money. So it's pretty good. We've had really good success with mediation since it's been instituted, and so it is a really great process.

So more specifically about mediation, it's also confidential. So it gives the parties a chance to speak to each other about things that might help but that otherwise might prejudice their case. So if you come back in and the board knows that there's a weakness in their case, they can discuss that and try to work around that with the owner or if the owner points it out and says, "Hey, you can't do this because ..." You can talk about it. You can talk about all those little facts and details, the whys. Then even if the mediation falls apart and an agreement isn't reached, none of that information can be used in court. It can't be disclosed outside of the walls of the mediation. So again, a little extra security, a greater ability to talk to each other and work through the problem than you're going to get if you go to court where the judge or the trier of fact is going to be listening in or is going to be able to get that information and use it against you, so another great benefit to that.

At the end of the day, if you do reach a mediated agreement, it's a binding contract. If the owner or even the board doesn't fulfill the conditions of that contract, it's a lot easier to enforce in front of a judge than trying to argue about your governing documents. So if I go in and say, "Hey, Judge, mediation didn't work. We're talking about a shed here and this and that," then you have to explain the governing documents to the judge. You have to explain why they were violated. You have to prove everything. Alternatively, if you're going to a judge, if you've mediated an agreement, you have this contract, it says the owner's going to tear down the shed and they don't do it or don't do it in the time, it's a lot easier to take that document to a judge and say, "Hey, Judge, here's our contract. It says they were going to tear down the shed within 30 days. They didn't do it. Here we are." Much easier for a judge to understand. It really simplifies that process and saves ultimate litigation funds because these things can get really expensive if you end up trying to try them.

Alan Tannenbaum, Esq.:

Jim, just to clarify for everybody who's not familiar with mediation, it is a settlement process, meaning a mediator doesn't decide anything. Mediator just acts as a settlement facilitator.

James "Jim" Turffs, Esq.:

Right. So to expand on that, mediation is a pre-suit process. It involves finding a neutral mediator. Just because one party's worked with the mediator in the past, doing this as long as we have, I know most of the mediators who are going to ... I've worked with them as far as these types of disputes. Not a problem. They're very neutral. They will acknowledge, "Hey, I've worked with Mr. Turffs before. I'm not prejudice. I'm not going to side with him because I know him. We're all here. It's independent."" I like to think of mediators as translators. They will listen to the association's position and they will try to translate it into language that the owner will understand.

Then when the owner says, "Okay, I get that, but here's my position." They can translate that back into what the association can understand into its language and really just helps everybody understand the problem better, and once that understanding is reached, the solutions follow fairly quickly.

 To be clear, I think, at least in the way I've seen mediation used, you're talking now generally about a violation that is significant and worth the possibility of going to court over if it's not resolved by the owner. I think strategically, utilizing the mediation, pre-suit mediation procedure as a strategic tool, the benefit there is that if the owner chose not to participate in that process, and if somehow you wind up in court and you don't win as the association, the owner, because they didn't participate in the mediation process, forfeits their right to recover attorney's fees back from the association. So there's that defensive strategic reason for using mediation in addition to, "Well, let's try to avoid going to court in first place and hopefully we can all come to a settlement." Am I understanding that right? Would you, Jim and Cindy, agree with me that that's the overall overarching parameters of the pre-suit mediation process?

James "Jim" Turffs, Esq.:

Absolutely. It just provides ... It's a far more cost-effective option to litigation, but once the process is broken down, again, thousands of dollars of fines aren't getting the job done, this owner consistently violates, this is something that is clearly heading to litigation or maybe even just seems like it's heading to litigation. I don't want to [inaudible 00:53:05] because I know we have you here, if I'm permitting to talk a little bit more about the litigation option, which I actually don't think we're going to have for you, so we'll get into it.

Alan Tannenbaum, Esq.:

No, I've actually gone to less question and answer because there are a lot of questions and we can go on for a few minutes after the noon hour. So let's get into the question. There's an interesting one. If the owners attend the committee meeting, do they have a right to speak to try to defend the owner being fined?

James "Jim" Turffs, Esq.:

I'm sorry. I did not hear that. Some noise just started outside my window.

Cindy Hill, Esq.:

I had the same problem. Sorry, Alan. There's a building being built next door to us, just so that all of you know.

Alan Tannenbaum, Esq.:

All right. If owners attend the fining committee meeting, they're not the violator, they're just members of the community. Do they have a right to speak to try to defend the person being fined?

James "Jim" Turffs, Esq.:

That's a fair question. Again, not necessarily addressed in the statute. It is being held as a committee meeting, so-

Cindy Hill, Esq.:

An owner could potentially present someone as a witness, but I would say on the flip side, somebody couldn't just raise their hand and start interrupting the hearing process.

James "Jim" Turffs, Esq.:

Again, so my position is that the fining committee can entertain whatever evidence comes before them. So if there are witnesses, if there are people who can contribute additional information to the matter at hand to help advise the committee, they can consider it. I don't know I would go as far as to say they have a right to speak on agenda items here like they would at another meeting, but somewhere in between, I think.

Alan Tannenbaum, Esq.:

So it sounds like the intelligent approach, if the violator is presenting people in their defense, the committee probably should allow at least those witnesses to speak, but if somebody raises their hand and they're not being called by the violator, the committee has a discretion of saying, "We're not really taking input from you because you haven't really been called as a witness." There's a question about how the mediator gets paid or they both sides contribute to that or just the association? How does that work?

James "Jim" Turffs, Esq.:

It's set up as a 50/50 split, so you pick your mediator. Again, the owner, well, whoever is the respondent, so if the association is saying, "You're in violation. We've sent you this pre-suit mediation notice," it contains a list of mediators and then the owner gets to pick. So that list of mediators contains their costs, their hourly fees or whatever it is. The owner has the opportunity to review their websites and investigate those, and so they will pick the mediator based on that information, and then the fees will be split 50/50. It can be varied. The statute does say that it doesn't have to be 50/50. I've never seen mediation where it hasn't been. I can't really think of an idea off the top of my head about why you'd want to bear more of that cost or something like that, but the short answer is 50/50.

Alan Tannenbaum, Esq.:

Can the mediator require payment in advance as a condition of going through with the mediation?

James "Jim" Turffs, Esq.:

Mediator can, if they have a minimum two-hour fee or something like that, yeah, they can ask for ... Again, that's just going to be by contract with the mediator. So they can schedule their payment certain different ways, but again, I don't see that happening as much anymore. It used to be mediators had two-hour minimums or something like that. I think the trend now is just to do straight hourly and just really bill you for what you get, at least that's what I've seen more often, not to say it's the only way.

Alan Tannenbaum, Esq.:

What if the owner doesn't pay the mediator and it's an advance fee requirement? Do they waive the right to mediate or is the mediation considered concluded?

James "Jim" Turffs, Esq.:

Again, so I think it's within reason for the mediator to say, "You're not paying our fees." Payment of the fee is certainly part of it. So if they're not doing what they need to get access to the mediator, then I think you're safely going to be able to tell the judge down the road, "We offered, they pick the mediator, and then they refuse to participate in the mediation by refusing to pay and meet those contractual obligations." So again, the owner has to sign a contract with the mediator, so does the association, and if they agree to those terms and then don't abide by them, well, then they haven't complied with the mediation required.

Alan Tannenbaum, Esq.:

Folks, this presentation will be available on our website probably within a week to 10 days, so you can refer other people to it. I'm just looking to see if there's any last couple of questions that Cindy or Jon wanted to attack.

James "Jim" Turffs, Esq.:

I want to reach out. There was one I didn't get a chance to type to here, which is asking about how specific rules should be. I think it's a balancing test for enforcement purposes. The more explicit your rules are, the easier they're going to be in front of a judge. So if in your example you say patio tile has to be one color, having a list of colors that are approved is going to be a lot easier to defend in front of a judge rather than saying, "Well, we don't think that color that they've asked for is aesthetically pleasing," because then a judge is going to go, "Well, is that really in your purview?" Uniformity, yes, aesthetics certainly has a part to play here, but did the owner really know they were violating by picking this color because you didn't tell them you couldn't have that color? The more vague they are, the more discretion the board has, but that discretion might also weaken your case if you get to litigation.

Alan Tannenbaum, Esq.:

One question was about selective enforcement. So fining committees, having their committee meeting, the owner shows up and says, "Well, you fined me for this violation, but there are six or seven other people who are committing the same violation and you're not assessing any fine against them?" Does that set up a potential defense for that violator?

James "Jim" Turffs, Esq.:

I will tell you what I recommend in that situation and then let anybody else respond, but what I recommend is, oh, I recommend the fining committee or the board say, "Fine. Tell us what those addresses are and we'll take care of it."

Cindy Hill, Esq.:

Agreed.

James "Jim" Turffs, Esq.:

That really undercuts it. You say, "We just didn't know about those violations. Come on, rat on your neighbors and we'll go take care of it for you." Very often, they will turn around and say, "Well, I don't want to complain about my neighbors," or, "I don't have the list with me," but that's really, I think, the way you handle it.

Alan Tannenbaum, Esq.:

I'm just looking through the chat and one of the questions, and maybe we'll take this as the last one unless there's anyone in particular you wanted to answer, but again, I think this has been asked and answered, but again, once the fining committee levies its fine, is there any adjustment at all on that that the board can make? Gets the report back from the fining committee, it obviously can't increase that fine, but can it reduce it or can it then decide, "We don't want to fine at all after all"? Cindy or Jim?

Alan Tannenbaum, Esq.:

Well, the fining committee acts, assesses a fine. What is the discretion of the board at that juncture as to, number one, maybe decreasing the penalty, didn't thought it was excessive or deciding not to follow through at all?

James "Jim" Turffs, Esq.:

So I try to address one of those variations, that question in the chat. Since the fining process actually starts with the board, it would be odd for me to see a board recommend a fine to the committee, have the committee approve it, and then have the board go, "Ah, we didn't mean it." So that would be odd. Ultimately, the board is the one responsible for collecting these amounts. The fining committee levies the fine, but then the board's going to be the person responsible for actually collecting assessments, fines, payments. So theoretically, they could probably direct that the fine be removed.

The statutes don't really talk about it. There's no formal process for that. Aside from doing something pretty weird as far as changing their collections policy or something, I think it would be hard to do. I think once the board levies the fine, you're probably going to be stuck with it, but that's not to say there isn't a way for the board to forgive it or something like that down the road, but not that I know of.

Alan Tannenbaum, Esq.:

All right. Folks, we're going to conclude. You can get a copy of the PowerPoint. You can email Michelle for that, but remember that this entire session is going to be on our website probably within seven to 10 days, so you can always refer back to it. I believe that when we publish it, it also has a transcript that's published with it, so you'll have access to that. I want to thank everybody for participating today and we're going to have another interesting topic, yet undetermined for next month. Hope everybody can come back for that. Everybody, enjoy your lunch and have a nice day and we're going to conclude at this juncture. Thank you.

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Don't Let the Florida Statute of Repose Catch Your Association by Surprise

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As of January 1, 2024, was the temporary or final certificate of occupancy for any of your buildings (condos, townhomes/duplexes administered by an HOA, HOA clubhouse, etc.) issued more than six years prior but less than ten years prior? Or, as of January 1, 2024, were any improvements at your development (paving, drainage structures, tennis courts, etc.) completed more than six years prior but less than ten years prior? If so, pay close attention.

The Florida Legislature in the 2023 legislative session reduced the statute of repose in Florida from ten to seven years, but with a limited savings clause for associations who act by July 1, 2024. A statute of repose is an artificial legislatively-created outside boundary for the pursuit of latent construction defects in a building or improvement. Here is the current statute with an important footnote:

95.11 Limitations other than for the recovery of real property.—Actions other than for recovery of real property shall be commenced as follows:
1(3) WITHIN FOUR YEARS.—
2(b) An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 7 years after the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest. . . . With respect to actions founded on the design, planning, or construction of an improvement to real property, if such construction is performed pursuant to a duly issued building permit and if the authority having jurisdiction has issued a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, then as to the construction which is within the scope of such building permit and certificate, the correction of defects to completed work or repair of completed work, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced. . . . Notwithstanding any provision of this section to the contrary, if the improvement to real property consists of the design, planning, or construction of multiple buildings, each building must be considered its own improvement for purposes of determining the limitations period set forth in this paragraph.
. . .
2Note.—Section 3, ch. 2023-22, provides that “[t]he amendments to s. 95.11(3)(c), Florida Statutes, made by this act apply to any action commenced on or after the effective date of this act, regardless of when the cause of action accrued, except that any action that would not have been barred under s. 95.11(3)(c), Florida Statutes, before the amendments made by this act must be commenced on or before July 1, 2024. If the action is not commenced by July 1, 2024, and is barred by the amendments to s. 95.11 (3)(c), Florida Statutes, made by this act, then the action is barred.” Paragraph (3)(c) was redesignated as paragraph (3)(b) by s. 3, ch. 2023-15.

As of January 1, 2024, if the temporary or final certificates of occupancy were issued for any of your buildings more than nine years prior but less than ten years prior, you may need to file an action very quickly to preserve your claims. Similarly, as of January 1, 2024, if any of the improvements at your development were completed more than nine years prior but less than ten years prior, you may need to file an action very quickly to preserve your claims. As of January 1, 2024, if the temporary or final certificates of occupancy were issued for any of your buildings more than six years prior but less than nine years prior, you risk being time barred to pursue such claims if you fail to file an action by July 1, 2024. Similarly, as of January 1, 2024, if any of the improvements at your development were completed more than six years prior but less than nine years prior, you risk being time barred to pursue such claims if you fail to file an action by July 1, 2024.

Confused? Seek advice from one of our construction claims’ attorneys.

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Thinking of Adding Charging Stations to Your Condo or HOA? - There’s Much to be Considered

With electric cars becoming the trend, owners in Florida condos and HOAs are requesting that their Boards consider installing charging stations. Before as a Board that you act on the request, there is much that needs to be considered first.

Authority

For condominiums, adding charging stations to the common elements is authorized by Section 718.113(9), Florida Statutes, and a vote of the membership to approve the addition of charging stations as a material alteration is not required. Chapter 720 does not require an owner vote to add charging stations on HOA-owned property, but the CCRs for the development should be consulted as some restrict improvements by Board vote alone.

Bringing Electrical Service to the Charging Stations

Whether you lease or purchase the charging stations, you will need to get power to support the charging stations. An electrical engineer should be contacted to determine if your current electrical system can support the additional load and how best to bring the power to the charging stations. Obviously, the cost of extending the electrical service to the charging stations will have to be included in the budget for the project. Typically, the charging station vendors have preferred electrical contractors, but they don't otherwise involve themselves in that work.

Maintaining the Charging Stations

Charging station manufacturers and vendors have been very effective in meeting the demand for charging stations nationwide. However, the volume of charging stations installed in the last few years has outstripped the capacity of the charging station vendors to maintain them. In California, which has led the nation in the installation of charging stations, it is not uncommon for half the charging stations at any particular location to be out service, with the situation going unresolved indefinitely. Vendors in their contracts offer quick maintenance service if the problem is resolvable remotely. If not, there is typically no requirement for the vendor to send a crew out to repair a problem within x amount of days of a problem being reported. If leased, the best you might get is a credit against the lease obligation.

Insurance

The association's insurance agent should be consulted to determine if existing property and liability coverage is sufficient to cover the risks associated with the operation of charging stations. It may be necessary for a special rider covering such a use to be secured.

Protecting Against Station Damage or Abuse, and Claims by Users

It is essential that the Board establish carefully conceived and drafted user rules and regulations and require that users sign documentation making them responsible for the damage they might cause to equipment and indemnify the association against potential claims by the users. Signage should be considered stating clearly that the association is not responsible for damage that might result to a vehicle or the user through the use of a charging station.

Passing the Cost of Use Through to the Users

There is a good argument that since the charging stations will only benefit a portion of the association membership, the fees charged to the users should be sufficient to cover the association's initial investment, electrical usage, maintenance, insurance riders, legal fees, and other incidental costs. For a cut, your charging station vendor will process user fees.

Conclusion

It is appropriate for HOA and condo boards to do their best to accommodate owners' needs, and installing charging stations falls into this category. However, boards should enter the venture with open eyes. What hidden costs have not been anticipated? Will we be able to get maintenance performed? How do we control potential user abuse? What should be charged for use? Consult your general counsel for assistance in negotiating the agreement with the vendor, establishing reasonable rules and regulations for use, and drafting appropriate user agreements.

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Why Waiting to Implement the New Condo Repair/Reserves Legislation is a Mistake

It has become apparent that certain condo boards in Florida are taking a "wait and see" attitude towards implementing the requirements of the new Condo Repair/Reserves legislation. The reasons cited have been:

  1. The legislation was thrown together at the last minute, and until The Legislature clarifies ambiguous portions of the legislation, it would be hasty to act;
  2. The engineering/reserve studies that we currently have are good enough, and our reserves are enough; and
  3. The engineers are too busy or are outright refusing to conduct the required studies.

Waiting to implement the statutory requirements for all or any of these reasons is a mistake. Here's why:

THE LEGISLATURE IS UNPREDICTABLE

The Florida House of Representatives spent the 2022 regular session ignoring both the consequences of Champlain Towers and the property insurance crisis. It was only public outcry after the session, which caused both issues to be addressed in a special session. Will The Legislature pass a glitch bill in 2023 to clear up some of the ambiguities of the legislation recently passed? It may. If it doesn't, will a glitch bill be passed in 2024? Again, it's possible. If a glitch bill is passed, what issues will it cover? Again, who knows?

DIRECTORS RISK INDIVIDUAL LIABILITY

The common law in Florida before the passage of the new legislation basically immunized condo board members from individual liability except where they stole money from the Association, made financial decisions benefitting themselves, friends or relatives, or they used their position for discriminatory or vindictive purposes. Failure to maintain, failure to repair, failure to budget? These acts or failures to act may have subjected the condo association to corporate liability but were not a basis for individual director liability.

This has all changed with the new legislation. Pursuant to Florida Statute 468.4334(1)(a), the officers or directors of a condominium association required to have a milestone inspection, who willfully and knowingly fail to have the inspection performed, are in breach of their fiduciary duty and are personally liable.

The bottom line? Not taking action to at least attempt to secure the milestone inspection comes at great personal risk to board members. Would this be covered by directors' and officers' liability coverage? Perhaps. Or it could be subject to a policy exclusion.

THE NEW LEGISLATION IS VERY SPECIFIC ON WHAT IS NOW REQUIRED AND GUARANTEED IT IS DIFFERENT FROM WHAT YOU ALREADY HAVE

Nobody could have predicted the line items which The Legislature included in the new legislation, the terminology used, nor the procedures mandated. It is thus guaranteed that anything a Board had prepared before the legislation complies with what the legislation requires. With the personal exposure, relying on what you have is a risky move.

TRYING TO COMPLY MAY BE FRUITLESS

It is apparent that The Legislature passed the new legislation without inquiring of the stakeholders whether its implementation according to the strict schedule set forth by The Legislature was possible. The structural engineers of Florida certainly weren't consulted. In the wake of Champlain Towers and the Florida building boom in general, they were already overloaded. Board will have a very hard time finding engineers who are willing to undertake the studies and if so, are able to meet the strict deadlines in the legislation. So, the sheer nature of the task statewide in condo land relative to the manpower available to carry it out guarantees that for many condos, strict compliance will be possible.

TRY ANYWAY

There is a contract law concept known as "Impossibility of Performance" which under certain circumstances can excuse a party's performance under a contract. The Legislature has mandated that studies and reporting be initiated and completed on a set schedule. Make the attempt. Contact several engineering firms. Can't comply after all this? You've made a record of attempting to comply, and the impossibility of performance defense should be available to you in some form. After all, you can't do the impossible? Right?

CONCLUSION

The Florida Legislature, in its wisdom, established rigid performance requirements for condo associations for the undertaking of engineering inspections and the funding of reserves. These requirements were established apparently without inquiring of the structural engineering community in Florida whether the new workload could be borne. At the same time, the Legislature exposed individual directors to liability if they don't meet the proscribed deadlines. The bottom line: try anyway. It should be enough to avoid individual liability.

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Good deal turns sour for buyers in Manatee County development after potential price increases

View full article below.  Published in Herald Tribune, July 7th by Derek Gilliam 

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THE PITFALLS TO FLORIDA COMMUNITY ASSOCIATIONS OF UTILIZING NATIONAL INDUSTRY FORM CONTRACTS FOR REPAIR PROJECTS

The American Institute of Architects and three national engineering associations publish contract forms (AIA owner/general contractor agreements) and (EJCDC owner/general contractor agreements) that are intended for use nationally on major new construction projects.It's an easy default for Florida architects, engineers and contractors to recommend the use of these form contracts, or even incorporate such form contracts in their project manuals.Unfortunately, unless appropriately revised, they are a poor fit for a Florida repair project and do not adequately protect a community association's interests.

WHO IS BEST PROTECTED IN THESE FORM AGREEMENTS?

It was a brilliant strategy for architects and engineers to develop their own owner/general contractor contract forms.This is because they took the opportunity to maximize the design professional's authority in the construction process while minimizing the design professional's responsibility.A knowledgeable construction lawyer looking out for the Association's interests can go page by page through these form agreements to remove or revise the clauses which tend to minimize design professional responsibility.

Perhaps the most glaring weakness in these form agreements is that they make the design professional the initial arbiter of all disputes between owner and contractor.This may seem like an appropriate role for the design professional, but what if the dispute arises primarily or even partially from a glitch in the design?This represents a built-in conflict of interest.

INSURANCE REQUIREMENTS

The form agreement recommended on your project may provide for a waiver of subrogation by all parties.Subrogation in this context is where your insurance carrier pays a claim then seeks reimbursement for what they paid from another party's insurance carrier.But have the insurance companies involved signed off on this?If not, the Association's property insurance company, if it pays a claim, may ask for its money back from the Association when it subrogates against the general contractor's insurance company and is informed that the Association waived subrogation on its behalf in the contract.

The form agreements make the Association the named insured under the contractor's liability policy.This doesn't happen automatically.The contractor actually has to go to its insurer and secure a special endorsement for this.The form agreements leave out this detail.Make sure that the general contract is modified to require the endorsement (and then make sure it is provided per the contract).

The form agreements require that the Association obtain Builder's Risk Insurance.This covers losses during the work.This insurance may already be covered under the Association's existing property insurance coverage.If not, the specifications incorporated in the form contracts for the insurance may not match what is available in the market.The requirement for Builder's Risk insurance in the form contract may have to be modified or deleted.

LIQUIDATED DAMAGES FOR DELAY

There are none in these form agreements unless daily penalties for late completion are inserted.Additional language needs to be added to assure that the liquidated damages clause is enforceable in Florida.

INTEREST ON THE UNPAID BALANCE

There are various reasons why an Association may withhold payment.If it turns out that money was not justifiably withheld, you want the contract to provide for a reasonable interest rate to be owed on the unpaid balance.Under the form contracts, it's generally going to default to 18% in Florida unless a lower % is inserted in the form agreement.

FLORIDA DISCLOSURES

There are lien law and claim notice procedure disclosures which need to be incorporated in Florida repair contracts.The form industry agreements, being aimed towards a national audience, don't contain these.

VENUE AND DISPUTE RESOLUTION

The form industry contracts either mandate the arbitration of disputes or offer the option of either arbitration or circuit court.But under the AIA-form agreement, even if you choose circuit court, the agreement still requires that you mediate before filing suit under the auspices of the American Arbitration Association.We generally strike the AAA mediation requirement if circuit court is chosen as the venue.

It is very important that the venue for disputes with the design professional be the same venue as the disputes with the contractor.We always recommend venue for disputes in both the Association/design professional agreement and the Association/contractor agreement be designated as the state circuit court where the property is located.State court is preferable because it allows the Association the choice of a jury trial, there are broad discovery rights, all parties who may be liable are brought together in one action, there are full rights of appeal, and there are means through the proposal for settlement process to place pressure on the opposition to settle.

The form industry contracts do not provide for the award of prevailing party attorney's fees and costs.This is an essential protection for an Association and needs to be added to the form industry contracts.

CONCLUSION

Form industry contracts contain many great protections for Florida community associations on major repair jobs.However, they should not be adopted lock, stock and barrel without careful scrutiny and revision/supplementation by a Florida construction lawyer. 

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BUYER BEWARE: ONEROUS GENERAL CONDITIONS MANY ENGINEERS ARE ATTACHING TO THEIR AGREEMENTS, AND NOT WARNING YOU ABOUT

Florida engineering firms servicing condos, and connected townhome and duplex buildings under HOA control, before the tragic Surfside condo collapse were already paying very high premiums for professional liability insurance. Plus, the per claim deductibles under these policies were very high, sometimes up to $100,000 per claim.

After the Surfside condo collapse, professional liability insurers have tightened the screws on Florida engineers even more. As one method of reducing their risk in order to offer more modest premiums, professional liability insurers have supplied the engineers with standard general conditions to attach to their agreements, many of which conditions unfortunately represent a trap for Boards and management.

Some engineering firms are up front about the onerous general conditions that seek to impose. They indicate in bold letters on the cover page of their agreements that the fees quoted are based upon the engineer severely limiting their liability contractually, and that if the client desires the engineering firm's liability to be expanded then the engineering fees can be further negotiated to compensate for greater liability exposure. Unfortunately, this is the exception to the rule. Most engineering firms passing on the onerous general conditions supplied by the professional liability insurance companies don't mention word one about them when presenting their proposals. Management agents and Board Presidents don't know better, and these agreements are signed daily binding condo associations and HOAs to terrible terms.

Understand that not all the onerous general conditions are the product of the professional liability insurance industry. Some originate with engineering trade associations and groups. Others are based upon input from counsel retained by the engineering firm. In any case, here are examples of the traps for the unwary contained in attached general conditions:

LIMITATION OF LIABILITY

Many associations take solace in the fact that an engineering firm provides them with a Certificate of Insurance reflecting professional liability limits of a million dollars or more. Unfortunately, the general conditions attached to the engineer's agreement may contain a provision limiting the engineer's liability to the amount of fees paid or some low dollar amount such as $25,000 or $50,000 .If the engineer screws up the remedial design, and the association suffers major damage, the professional liability insurer will tender that $25,000 or $50,000 and call it a day. That million dollars of coverage recited in the Certificate of Insurance, of course, was merely an illusion.

INDEMNIFICATION

Indemnification refers to when another party is contractually bound to pay your defense costs and any judgment entered against you. Indemnification in the construction context has historically been a contractual benefit to an owner in relation to the general contractor. Basically, if the contractor screwed up and the owner was sued, the contractor was bound to pay the defense costs for the owner, and any judgment entered against the owner. As between the owner and the engineer or architect, there was generally no indemnification protection mandated by contract.

In a break from the past, engineers now try to impose indemnification obligations on associations in their general conditions. Some of the more onerous indemnification provisions impose full indemnification obligation on the association if the association or contractor are even partially responsible for the loss. This means in theory that if there is an issue with the completed project which a jury determines is 95% caused by the engineer's negligence and 5% caused by the contractor, the association will arguably have to indemnify the engineer for the whole of the damage and defense costs, including the engineer's 95% share.

Who would bear the burden of such an indemnification obligation? Arguably not the association's liability carrier (check with your agent). More likely it will be the association membership.

That would be a bitter pill for something which was primarily caused by the engineer's negligence.

WAIVER OF CONSEQUENTIAL DAMAGES

"Consequential damages" in the broadest sense of the term in relation to engineering design flaws are damages which flow as a consequence of the design flaw. If an engineer designs a balcony repair improperly and the balcony collapses, the cost of replacing the balcony is the direct damage, whereby the damage caused to balconies and automobiles below would represent "consequential damage. "In that particular example, the "consequential damage" in dollar terms may be significantly greater than the "direct damage."

The general conditions attached to the engineering agreement handed to you may contain a full waiver of consequential damage. There is no reason for this except to erase a large potential exposure for the engineer and their liability insurance carrier.

ASSUMPTION OF ALL RISKS

There were a set of general conditions recently reviewed by the author which included the sentence: "Client assumes the entire risk as to the use of the deliverable, and any results generated thereby. "This could be interpreted to mean that the association assumes all risk of flaws in the engineer's design. Yeah, that's fair and reasonable

FULL PAYMENT DUE EVEN IF ENGINEER IS TERMINATED FOR CAUSE

If the engineer is six months late in producing design documents, and the association terminates the engineer because of nonperformance, there may be a clause in the general conditions providing that the engineer is still entitled to full payment for whatever work had been accomplished with the design as of termination.

COLLECTION COSTS AND REMEDIES

Often in the general conditions, if the association does not pay the engineer, even if the engineer screwed up, interest of up to 18% is imposed on any on past due balance, and the engineer is entitled to attorney's fees and costs for pursuing the balance due.

DEADLINE FOR PURSUING CLAIMS AGAINST THE ENGINEER

In Florida, an association has four years from the date a consequence of an engineering design defect is discovered to file suit (but no more than ten years from the date of project completion for a latent defect). Sometimes in the general conditions there is a provision limiting the time period for filing suit to, for instance, two years. Again, there is no justification for this other than to artificially cut off claims for which the engineer and its carrier would otherwise be responsible.

DISPUTE RESOLUTION

General conditions attached to engineering agreements often call for the arbitration of professional liability claims with no attorney's fees or costs being awardable by the arbitrator. Lawyers representing associations generally recommend that disputes be resolved in the state court in the judicial circuit in which the property is located, with the prevailing party being entitled to an award of attorney's fees and costs. The main reasons associations should want to be in state court are (1) the right to have the case heard by a jury; (2) all parties and claims involved in the dispute are brought together in one forum; (3) full discovery rights are available; and (4) full right of appeal.

REJECTING THE GENERAL CONDITIONS BEFORE THE AGREEMENT IS SIGNED

This is the key. Look for the general conditions when the engineering agreement is first presented and send the agreement over to construction counsel to review before signing. Most of the time when engineers are called on the onerous general conditions they have presented, they will agree to grudgingly modify them. Modification after the agreement is executed, especially where the design has already been performed, brings with it complications, primarily the fact that the professional liability insurance carrier may not sign off on the retroactive modification of the engineering agreement.

WHAT'S THE ULTIMATE SOLUTION FAIR TO ALL PARTIES?

In the wake of the Surfside tragedy, associations across Florida are having their buildings investigated by engineers, and the engineers are finding problems which often require major repairs. The professional liability insurance underwriters are understandably concerned about the exposure this wave of repair designs will bring as the insurers of the engineers' work product. The professional liability insurance carriers, knowing that there is a limit to what they can charge in premiums to the engineers, opt instead to transfer the risk to associations through onerous general conditions which they have their insureds include in their agreements.

The solution may lie in project-specific professional liability coverage. Let's say an engineer is asked to design a $3,000,000 condo repair project. The engineering firm goes to its professional liability carrier and gets a quote for how much additional premium over the engineer's standard premium the carrier would charge for providing professional liability coverage of a million dollars for the design. Say the carrier quotes $7,500.00. The cost of that project-specific premium is quoted to the condo association in the engineering agreement as an optional cost if the condo association wants full professional liability coverage. The engineer is not burdened by the additional premium, the design is appropriately insured, and the risk absorbed by the carrier is accounted for through the enhanced premium.

Professional liability underwriters, can you meet this challenge?

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Delayed HOA Turnovers -  Can the Lot Owners Force Turnover?

Florida has a strong, comprehensive Condo Act (Chap. 718). It has a weak HOA Act (Chap. 720). It is apparent that developers in Florida kicked themselves for having allowed a consumer-friendly Condo Act to have been passed in the early 1970's by The Florida Legislature and vowed never to allow it to happen for deed-restricted HOA communities. The result has been a concerted effort by developers since the '70's to block attempts to incorporate basic consumer protections in Chap. 720. One example concerns the right of lot owners to force the turnover of the HOA to lot owner control.

Under the Condo Act, there are several possible triggers mandating turnover:

718.301 Transfer of association control; claims of defect by association.—
(1) . . . Unit owners other than the developer are entitled to elect at least a majority of the members of the board of administration of an association, upon the first to occur of any of the following events:
(a) Three years after 50 percent of the units that will be operated ultimately by the association have been conveyed to purchasers;
(b) Three months after 90 percent of the units that will be operated ultimately by the association have been conveyed to purchasers;
(c) When all the units that will be operated ultimately by the association have been completed, some of them have been conveyed to purchasers, and none of the others are being offered for sale by the developer in the ordinary course of business;
(d) When some of the units have been conveyed to purchasers and none of the others are being constructed or offered for sale by the developer in the ordinary course of business;
(e) When the developer files a petition seeking protection in bankruptcy;
(f) When a receiver for the developer is appointed by a circuit court and is not discharged within 30 days after such appointment, unless the court determines within 30 days after appointment of the receiver that transfer of control would be detrimental to the association or its members; or
(g) Seven years after the date of the recording of the certificate of a surveyor and mapper pursuant to s. 718.104(4)(e) or the recording of an instrument that transfers title to a unit in the condominium which is not accompanied by a recorded assignment of developer rights in favor of the grantee of such unit, whichever occurs first; or, in the case of an association that may ultimately operate more than one condominium, 7 years after the date of the recording of the certificate of a surveyor and mapper pursuant to s. 718.104(4)(e) or the recording of an instrument that transfers title to a unit which is not accompanied by a recorded assignment of developer rights in favor of the grantee of such unit, whichever occurs first, for the first condominium it operates; or, in the case of an association operating a phase condominium created pursuant to s. 718.403, 7 years after the date of the recording of the certificate of a surveyor and mapper pursuant to s. 718.104(4)(e) or the recording of an instrument that transfers title to a unit which is not accompanied by a recorded assignment of developer rights in favor of the grantee of such unit, whichever occurs first.

Under the HOA Act, the triggers for mandatory turnover of the HOA to lot owner control are more limited:

720.307 Transition of association control in a community.—With respect to homeowners' associations:

(1) Members other than the developer are entitled to elect at least a majority of the members of the board of directors of the homeowners' association when the earlier of the following events occurs:
(a) Three months after 90 percent of the parcels in all phases of the community that will ultimately be operated by the homeowners' association have been conveyed to members other than the developer;
(b) Such other percentage of the parcels has been conveyed to members, or such other date or event has occurred, as is set forth in the governing documents in order to comply with the requirements of any governmentally chartered entity with regard to the mortgage financing of parcels;
(c) Upon the developer abandoning or deserting its responsibility to maintain and complete the amenities or infrastructure as disclosed in the governing documents. There is a rebuttable presumption that the developer has abandoned and deserted the property if the developer has unpaid assessments or guaranteed amounts under s. 720.308 for a period of more than 2 years;
(d) Upon the developer filing a petition seeking protection under chapter 7 of the federal Bankruptcy Code;
(e) Upon the developer losing title to the property through a foreclosure action or the transfer of a deed in lieu of foreclosure, unless the successor owner has accepted an assignment of developer rights and responsibilities first arising after the date of such assignment; or
(f) Upon a receiver for the developer being appointed by a circuit court and not being discharged within 30 days after such appointment, unless the court determines within 30 days after such appointment that transfer of control would be detrimental to the association or its members.

What is obviously missing are timeline triggers other than the 90% sale threshold. This is what has allowed HOAs in projects around Florida slow to be completed to remain under developer control sometimes for decades.

For possible receivership, Chapter 720 is also limited. Here is the operative statute:

720.3053 Failure to fill vacancies on board of directors sufficient to constitute a quorum; appointment of receiver upon petition of member.

(1) If an association fails to fill vacancies on the board of directors sufficient to constitute a quorum in accordance with the bylaws, any member may give notice of the member's intent to apply to the circuit court within whose jurisdiction the association lies for the appointment of a receiver to manage the affairs of the association. . .
(2) The notice required by subsection (1) must be provided by the member to the association by certified mail or personal delivery, must be posted in a conspicuous place within the homeowners' association, and must be provided to every member of the association by certified mail or personal delivery. The notice must be posted and mailed or delivered at least 30 days prior to the filing of a petition seeking receivership. Notice by mail to a member shall be sent to the address used by the county property appraiser for notice to the member.
(3) If the association fails to fill the vacancies within 30 days after the notice required by subsection (1) is posted and mailed or delivered, the member may proceed with the petition.
(4) If a receiver is appointed, all members shall be given written notice of such appointment as provided in s. 720.313.
(5) The association shall be responsible for the salary of the receiver, court costs, and attorney's fees. The receiver shall have all powers and duties of a duly constituted board of directors and shall serve until the association fills vacancies on the board sufficient to constitute a quorum and the court relieves the receiver of the appointment.

In that the right to have a receiver appointed is tied solely to the developer not appointing a board and not to performance, unless the developer is not operating the HOA at all, this remedy would likely not bear fruit.

Chapter 720.305, does have some teeth and is likely the lot owners best bet to change the dynamics. It provides:

720.305 Obligations of members; remedies at law or in equity; levy of fines and suspension of use rights.

(1) Each member and the member's tenants, guests, and invitees, and each association, are governed by, and must comply with, this chapter, the governing documents of the community, and the rules of the association. Actions at law or in equity, or both, to redress alleged failure or refusal to comply with these provisions may be brought by the association or by any member against:
(a) The association;
(b) A member;
(c) Any director or officer of an association who willfully and knowingly fails to comply with these provisions; and
(d) Any tenants, guests, or invitees occupying a parcel or using the common areas.

The prevailing party in any such litigation is entitled to recover reasonable attorney fees and costs. A member prevailing in an action between the association and the member under this section, in addition to recovering his or her reasonable attorney fees, may recover additional amounts as determined by the court to be necessary to reimburse the member for his or her share of assessments levied by the association to fund its expenses of the litigation. This relief does not exclude other remedies provided by law. This section does not deprive any person of any other available right or remedy.

What would have to happen is that interested lot owners would need to band together, create a legal fund, and hire a lawyer to seek an injunction under Section 720.305 against the HOA and the developer directors seeking a court order requiring the HOA and developer directors to operate the HOA in accordance with Chapter 720 and the recorded HOA Covenants. This could result in the developer voluntarily agreeing to turn over control of the HOA to the lot owners. 

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CONNECTED TOWNHOMES ADMINISTERED BY FLORIDA HOAs

ARGUMENT FOR AMENDING THE CCRs EARLY ON TO MAXIMIZE THE HOA's MAINTENANCE, REPAIR, AND CLAIM AUTHORITY

For decades after condos were first developed in Florida in the '60s, developers desiring to build and sell connected townhomes (duplexes, triplexes, quadruplexes, etc) declared the buildings to condominium. Under the condominium regime, typically components of connected townhomes serving more than one unit (structural elements, walls, windows, roofs, and mechanical, electrical, and plumbing elements) were declared as common elements subject to the condo association's maintenance and repair responsibility.

Condo development in Florida, of course, carries with it some detriments for developers. First, broad non-waivable warranties of construction quality benefitting unit purchasers are imposed. Second, condo developers must jump through substantial hoops in getting documentation approved by the State. Third, condo association operation during the period of developer control is highly regulated, and the regulations are enforced by a state agency with jurisdiction over condo developers and developer-controlled condo associations. Fourth, statutes of limitation on claims do not begin to run until the transition of the condo association to unit owner control.

Deed-restricted HOA communities in Florida, on the other hand, are not subject to The Florida Condominium Act. There are no statutory warranties imposed on developers. There is no requirement to submit documentation to the State. There are only limited statutory requirements for HOA operation during developer control, and there is no regulating state agency. Finally, there is no statutory provision extending the accrual of statutes of limitation until turnover of an HOA to lot owner control.

Knowing the complexities and risks of developing condos in Florida, a couple of decades back some ingenious developer came up with the idea of developing connected townhomes under an HOA regime. Since then, many communities around Florida have been developed as deed-restricted HOAs containing solely connected townhomes or connected townhomes as part of a mixed single-family home/connected townhome community.

Connected Townhomes Under an HOA Scheme – The Maintenance and Repair Dilemma

With a condo, common elements are owned by all of the unit owners as joint tenants, with the common elements maintained and repaired by the condo association. A fellow owner far afield from your building owns as much of the roof on your building as you do. In an HOA with connected townhomes, no portion of the connected townhomes is jointly owned. Each townhome owner owns their townhome in fee simple. Consequently, with a fourplex, even though the townhomes are physically connected, there are only four owners each owning solely their townhome, which includes interior and exterior components (structural elements, walls, windows, roofs, and mechanical, electrical, and plumbing elements). The owner of a townhome across the street from you owns no part of your connected townhome.

The recorded Covenants, Conditions, and Restrictions (CCRs) of an HOA community may provide the HOA some degree of maintenance and repair responsibility over its connected townhomes. There is no statutory requirement, however, that the CCRs for an HOA community require the HOA to have any maintenance and repair responsibility for the connected townhomes. What has occurred as a result is that developer lawyers have drafted HOA documents that are across the board as far as HOA maintenance and repair responsibility over connected townhomes, from no responsibility, to some responsibility, to extensive responsibility.

Where the CCRs provide little or no, or simply incomplete, HOA maintenance and repair responsibility for the common elements of connected townhomes, the connected owners are left to fend for themselves. When one side of a duplex is settling because of a foundation deficiency or sinkhole, which may impact both units, there is no mechanism for sharing the repair decisions or expense, other than seeking court relief, if the duplex owners cannot agree. What if second floor or roof framing deficiencies in a fourplex are causing roof issues or exterior stucco cracking. You likely will not be able to fix the problem with each owner addressing just the framing of their particular townhome. How are they even going to agree on how the cost of having an engineer analyze the problem is to be split? What if there is disagreement on how to repair a problem that affects more than one townhome?

Investigating Defects and Deficiencies

Under HOA CCRs, HOAs are restricted to spending HOA funds strictly on Association responsibilities. If an HOA's maintenance and repair responsibility per the CCRs is limited to the painting of the exterior walls of connected townhomes, and the stucco is cracking, arguably the stucco cracking is not within the HOA's maintenance and repair purview, and thus HOA funds are not appropriately spent on investigating the stucco cracking. The same limitation would apply to foundation and framing deficiencies, common piping and mechanical component deficiencies, termite infestation, and any manner of serious construction and design defects that could affect connected townhomes.

With the HOA being restricted in its ability to investigate common defects and deficiencies, the owners of the connected townhomes are again left to fend for themselves as far as investigating the cause of the building issues, a situation ripe for confusion and conflict.

Pursuing Responsible Parties for Defects and Deficiencies

HOA standing to pursue responsible parties for defects and deficiencies in connected townhomes is governed by the following rule of procedure adopted by The Florida Supreme Court:

Rule 1.221 - HOMEOWNERS' ASSOCIATIONS AND CONDOMINIUM ASSOCIATIONS

A homeowners' . . . association, after control of such association, is obtained by homeowners.  . . . other than the developer, may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all association members concerning matters of common interest to the members, including, but not limited to:

. . . (2) the roof or structural components of a building, or other improvements (in the case of homeowners' associations, being specifically limited to those improvements for which the association is responsible); (3) mechanical, electrical, or plumbing elements serving a property or an improvement or building (in the case of homeowners' associations, being specifically limited to those elements for which the association is responsible) . . .

Simply put, if the CCRs don't provide for HOA responsibility for maintaining a component of connected townhomes, the HOA cannot pursue responsible parties for the cost of correcting the defects and deficiencies in such component. The stucco can be cracking on the second floor of all the connected townhomes in the community caused by framing deficiencies, but unless the HOA has repair responsibility for the framing and stucco, it lacks standing to pursue responsible parties for the cost of repair.

Without HOA standing to pursue responsible parties, townhome owners are again left to fend for themselves. Could six owners of a sixplex join together in a suit to tackle common defects in their connected townhomes? Possibly, but how would they agree on sharing the cost of pursuit? Then, if a recovery is realized, how would they agree on undertaking necessary repairs, especially if the cost of the repair was greater than the net recovery?

Economy of Scale in Undertaking Maintenance and Repairs

Our firm represented a duplex community with identical shingle roofs. In the first decent windstorm after construction was completed, several shingles were dislodged or blew off across the community. Under the CCRs, the HOA had no maintenance and repair responsibility for the roofs. The Board resisted the idea of proposing an amendment to the CCRs to provide HOA responsibility for duplex roof repairs or replacement.

Without the amendment of the CCRs, each pair of duplex owners was on their own as far as contracting with roofers to replace their defective roofs. It is no mystery within the roofing field that if a roofing contractor bids on the replacement of a single duplex roof in a community that the cost of those reroofs would be significantly greater per duplex than if the same roofing contractor was asked to bid the reroof of 150 duplexes.

An HOA has significantly greater buying power than owners operating alone. Furthermore, the HOA, with professional management, supported by an engineer and construction lawyer, is in a much better position to assure that the work is done correctly and on time, with manufacturer's warranties being delivered at the end of the job.

Protecting the Aesthetics of the Community

With the HOA administering repairs to the exterior of connected townhomes, the HOA is in the position to protect the aesthetics of the community as originally conceived. Retaining one repair contractor to conduct repairs on connected townhomes across the community allows for aesthetics to be preserved.

With owners hiring their own contractors to undertake stucco repairs, window replacement, roof repairs and replacement, etc., it would be very difficult over the long term to preserve the aesthetics of the community, with no doubt a concomitant negative impact on townhome values.

Safety Concerns

With contractors hired by the HOA to undertake exterior repairs and maintenance on connected townhomes, there is a much better opportunity to protect persons and property from damage resulting from repair efforts than if individual townhome owners are inviting contractors to the community on a piecemeal basis. This is especially true where the setback between sets of connected townhomes is very tight.

The Solution

Amend the CCRs in your connected townhome community to expand the HOA's maintenance and repair responsibility to cover all of the townhome exteriors, and the common structural, mechanical, plumbing, and electrical elements of the connected townhomes. That will cure the maintenance and repair dilemma, provide economy of scale in undertaking investigation and repair, allow for the efficient and effective pursuit of responsible parties, preserve the aesthetics of the community, protect property values, and reduce risk.

What if only a portion of the community is comprised of connected townhomes? Wouldn't the amendment unfairly burden the owners of single-family homes? The solution is to amend the documents so that only the owners of the connected townhomes are burdened by the assessments necessary to repair and maintain the townhomes and to pursue relief for any defects and deficiencies therein. But what if the HOA already had maintenance and repair obligations for the roofs? Should only the expansion of the maintenance and repair responsibility be borne by the townhome owners, or all of it?

The insurance requirements in the CCRs would likely also need to be amended so that common components of the connected townhomes are insured under the Association's property and liability coverages.

What about the expansion of an HOA's maintenance and repair responsibility to cover the exterior walls, roofs, and structural components of the single-family homes in the community? If the homes are identical in configuration and construction, this could make sense for all the reasons expressed in this article. If there is a common defect and deficiency affecting all the homes, amending the documents to expand HOA maintenance and repair responsibility could make for efficient claim pursuit.

Conclusion

There were problems easily anticipatable in Florida when developers chose for their convenience to develop connected townhomes and make them all or part of a deed-restricted HOA community rather than a condominium. There has been no statutory solution proposed to correct the anomalies created. Document amendment, however, can overcome the bulk of the ills. This could even be considered for single-family homes where the homes are consistent in configuration and construction. Consult your general counsel to get the amendments customized properly for your community. Beware of time constraints for claim pursuit which may dictate expedited action on amendment passage. 

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HOA & COA Guide to Multi-Family Re-Roofing Project

Jon Lemole, Esq.:

Good morning everybody and thank you for joining us. This is a great panel we've got planned for you today. We're happy that, so far, we've got 176 people joining us today. That's huge. We really appreciate that and we're glad that we see a lot of return faces, so I'll take that as a compliment that we're delivering some value for you all and we hope to continue to do that. So today, we're going to talk about reroofing projects, best practices for reroofing projects and this is going to be directed at multifamily buildings, obviously, so we're not talking about single family units. Obviously, those folks typically have to take care of themselves. But if you're an association that has maintenance and repair responsibility for a building's roofs, this is going to be a really, I think and I hope, a good walkthrough of best practices that you can all take to ensure that your project goes smoothly, little risk to the association or as little risk as possible to the association and that you wind up with a completed project that's defect free and will serve your association and its buildings for a long time to come. This applies to both condos and, typically in the HOA world, town home communities.

Why is this timely? You probably are seeing a lot of activity from your insurance carriers in terms of insurance carriers staring to say it's time to reroof your buildings. We're about 15 years out from the building boom prior to the recession and so you've got a lot of buildings that are approaching or have seen 15 years and so a lot of insurance careers are starting to tell you it's time to take care of your roofs. And given what's happened recently over in south Florida, we can expect that insurance companies are going to be even more vigilant and more adamant about building maintenance. We're expecting that a lot of you are going to be dealing with these reroofing projects in the very near future.

We think that we have a lot to bring in terms of advice and best practices. Let me tell you why that is and this may be a little bit against our self-interest as a firm because we handle typically... we do a lot of work in claims, in defect claims, and so we're uniquely suited to see what goes wrong with roofing projects when they don't go right. We know where the problems can be. We've seen all of the areas where things could have been done differently and a project could have... and that could have made a difference in how a project went. Another portion of our practice is to do major repair project consulting and our call to action here today to you folks is if we do have a major roof repair project or roof replacement project, I think there's a lot of people that tend to believe that that's a run of the mill type of thing and it's just a roofing project, but there's a lot that can go wrong and certainly we would encourage you to reach out to a construction lawyer, whether it's our firm or some other firm, and consult with them on the front end because there's a lot of decisions that could be made that can mean a huge difference in the way that your project goes.

What can you do if you have, besides consulting with us or somebody else, another construction lawyer, what can you do to ensure that your project goes smoothly? You can follow the best practices that we're going to run through today. We could spend hours on this, but we're going to give you a 30,000 foot highlight, a snapshot. We're going to talk about a bunch of things today, but obviously any one of these topics we could into in significantly more detail if needed. At the end of the day, I think I want to leave everybody with is the old saying, what did Ben Franklin say? A penny saved, pound foolish. I can't remember. Something like that.

Again, the inclination for roofing projects is that this is a thing that... a kind of a routine type of maintenance project for an association and it's anything but. It's not a time to cut costs, it's a time when an association should be saying, "How do we do this right, do it right the first time, control our risk and make sure that the project is delivered on time, complete, defect free?" because this is one of the primarily defenses to your buildings from water intrusion and the possibility that you could have a poor product, a poor result, which could create a lot of other problems for your building. And as we've seen recently, those problems can multiply, spiral and create significant problems for an association.

Let's just into the subject. Where we want to start is really quickly, and I'm going to introduce Brian Tannenbaum, who's an associate with our firm. He's the next generation of Tannenbaum to be part of our firm, but what Brian is going to talk about real quick is just to remind everybody of what the source of an association's authority is in terms of mainlining and repairing and replacing roofs on your buildings. With that, we're going to have Brian take it away and just cover that real quickly, give us a primer on that subject. Take it away Brian.

Brian Tannenbaum, Esq.:

Fixing the roofs, dealing with the windows, dealing with anything that comes up. But in the context of a multifamily home or a condo, these things are regularly maintained by the association. Now, for a condo, the law comes from Florida Statute 718 chapter 718, which gives the association the responsibility for maintenance of the common elements. It doesn't give an option and there's no ambiguity. It's not vague. It says that maintenance of the common elements is the responsibility of the association. 718.108 defines the common elements as, in part, the condominium property which is not included within the unit. This can be your roof, the balconies in some cases, any part of the condominium that is outside of the unit.

On the other hand in an HOA situation, there is no statutory basis that requires the association to maintain and repair any part of the property. Where the authority comes from is the declaration, so it's important to know what the declaration says about maintenance and repair of the property. For both an HOA and a condo, the board has a fiduciary duty to the members. Because they have a fiduciary duty to the members, it's important that they undertake repairs in a timely and appropriate way so that there's no liability opened up for the association or for the board members. When looking at your documents, you need to know what kind of things is the association responsible for and when do I as a board member or a manger need to make sure that those things get done.

There's a very heavy burden on the association and the board and it's important that those things get taken care of in a timely manner so that you can avoid that liability and that you can keep your building safe and secure.

Jon Lemole, Esq.:

Okay. Thanks Brian. Just a little segway from something that Brian touched on and I want to explore a little bit further before we move on is, and this is more appropriate to HOAs and town home HOAs than condos because the condo statute is pretty clear about common elements and there's not a similar statute or similar provision in 720, it's important to look at your declarations and understand whether, not just what the declaration requires the association to do, but whether the declarations enable and provide the association with the ability to do that work capably and completely. We've run across a lot of declarations that are typically the original declarations that were drafted by a developer, which are pretty ambiguous about what the associations begin and end in regards to roof replacements or roof repairs is.

If you've got a roof project coming up, you've got a situation where you're needing to replace a roof on a town home building for example, it would be a great time to look at your declarations and ensure that you can complete the job and that you don't have some sort of limitation in the declarations which may prevent you from doing a thorough job. Let me explain what that means. We've run across provisions in declarations where the association is responsible for the roof covering, the membrane or the shingles, but what happens if the roof, if over time there's damage to the framing, to the sheathing, to the roof trusses and that's not specified in the declaration as being part of the association's repair maintenance and repair responsibility? That can create some serious problems for an association.

If you've got a project that you're thinking, that you're expecting down the road, it's time to take a look at the declarations and make sure that you can do that work and that you don't have some ambiguity in your declarations. Folks, if you're in an HOA that's coming out of transition, a perfect time to review the developer's declarations and ensure that the association can do the work that it's going to need to do in order to completely, capably and without problems, without ambiguity discharge its repair obligations. What good is it if an association can only replace shingles, but can't correct damaged sheathing? You leave that to the lot owner and that may never happen and then you're just putting shingles over a problem that's just going to continue to further deteriorate the building, so don't always assume that the declarations are going to provide the association with a clear path to do what it needs to do in order to discharge its obligation.

Alan Tannenbaum, Esq.:

It's not only might the declaration impose some limitation on what an HOA can repair, but also arguably you can spend money on investigating the issue if it's not within the association's purview. And for a newer association, obviously the problem is the association can't pursue claims for an HOA for anything it doesn't have maintenance and repair responsibility over, so there's multiple reasons that the documents should be amended beyond just the fact that it constricts the ability of the association to do a full repair.

Jon Lemole, Esq.:

Well said. Thank you, Alan. So with that, let's turn to the subject of investigation. I'm going to ask my partner, Sal Scro, to talk a little bit about what are best practices in determining what you should be doing, what the scope of a roofing project should encompass because I think a lot of times, we just tend to assume that it's just a question of we're just going to put a new roof on the building. This is a time when an association can really take a good look and see what the scope of work should really be and that may involve some need to do some investigation, maybe bring some engineers in, but I'm probably talking too much and I don't want to steal Salvatore's thunder. So Sal, turning it over to you. Talk about investigation and engineering issues.

Sal Scro, Esq.:

Hi. Good morning everyone. The first thing that we're going to talk about is understanding why your roof may need to be replaced. There's a couple reasons. The first would be it's just an old roof, it's time to replace it. That's usually easy to figure out. You have your reserves. You have your reserve studies that usually tell you what your expected useful life is and you know if it's coming to an end. You can tell by the... if you're experiencing problems with an old roof, but then you may have a roof that's not so old and it may just be a bad roof. If that's the case, there's other things you may want to do versus just having to reroof before you just go out and get somebody to do the reroof on an old roof. If you have a bad roof, you may want to do some other things.

If, for example, you're having water intrusion and it may be coming from... you may have bad stucco and I've talked about this several times, you may cracking stucco. You may have water that's coming in through your windows. Water's going to seek its level. It's going to find its way into your building. That could be... One of the sources could from the roof itself. So any time you're having troubles with a roof, the first thing, my suggestion would be is if it's a fairly new roof, if it's something that has been constructed within 10 years, then I would suggest that you contact an attorney that does this construction defect work because they can recommend you to the right person to do the investigation so that if there is a problem with the construction, then you have the right team together to address that with the potentially liable parties.

If you have just an old roof, then maybe a good roofing company, a consultant or an engineer, but also if you have... The more changes you have in a roof as far as what I'm talking about changes, if you have different directions or slopes or different roof to wall intersections, a lot of valleys where roofs come together, chimneys, then you may want to engage the services of an architecture, an engineer to give you a detailed set of specifications so that the person going to do the work knows exactly what to do to apply the materials, to limit any possibility of water intrusion. That's one of the things.

The other thing that you may want an engineer for is, for example, if you plan on changing the type of material. If you have a shingled roof and you want to put a tile roof on it, you want to put a metal roof on, any changes in material, aside from the fact that you need to get approval from associations if you're a condominium, if you're going to change that, you definitely want to engage the services of a structural engineer because the weight. That's the key, the weight is the difference. If you've ever driven by and seen a roofing project and you see all the materials stacked up on the roof, they're all in different locations and it's not to make it easier so that they don't have to walk so far, it's because if they pile them all up in one spot, they're going to collapse the roof because it just can't handle the weight so it's important that you have engaged an engineer if you're ever going to change materials.

Also, if you have a roof that is a flat roof, that's something also you may want to do some pre investigation of before you just let somebody come in and say, "WE're going to just reroof this. And hey, here's your best way to do it. We can put this material in that will cover it. We can add vents to it so it'll let water evaporate out," all these things, my suggestion would be is do some investigation, particularly with an old flat roof because you have different layers of materials under that roof. What is the condition of each of those materials as you dig down? You don't know and you won't know unless you open it up, so I would suggest bringing an engineer in, having them uncover the roof, look down there and give you a detailed set of specifications.

There's a lot of times you can look at a roof and it looks old, but as you open it up and dig down, you find there's a pool under there, there's water, and you're not going to know that, you're not going to see it unless you open up. So if you have an old flat roof, sometimes it's best just to uncover the entire roof.

Alan Tannenbaum, Esq.:

Sal, an example of that. We had one recently. It was a built up roof and the contractor came in and said, "We're going to scrap the gravel, the loose gravel off of the built up portion, and then we're going to put a new roof on top of that." Well, it turns out that underneath this built up roof was a lightweight concrete fill that they used a couple of decades ago as roof insulation and the lightweight concrete fill was water saturated. What really then needed to be done on that particular roof was it needed to be taken all the way down to the structural deck and then a new roofing system installed above the original structural deck, but there would have been no way of knowing that unless somebody did a core through the built up roof, determined that it was indeed lightweight fill under that and do some moisture testing to determine what the condition of that is because you can't put a new roof over a bad subsurface. It'll cause a lot of trouble.

Sal Scro, Esq.:

Right. And we just did a testing the other day on a roof. It was metal and then there was a flat TPO roof. It's a Thermoplastic Polyolefin or something like that is the name for it. Anyway, that roof was three or four years old and I tried to get a video to show you, but I couldn't get it to transfer from my phone, but as we did the investigation, I lifted up some of the TPO roof, the flat roof, and I could pick up the sheathing and it would crumble in my hands. This was a roof that was three or four years old, so age isn't always a factor. It's the construction is very important. Why would want detailed specifications? Again, as I stated, the more cuts you have in a roof, the more differentiation in slopes and levels, you're going to want that.

You will also want to look into the... If you're going to have an engineer and they're going to provide year old with a set of specifications, you're going to want to have somebody look at that contract with your engineer as well. Make sure that they don't have a limitation of liability just for the money that you've paid them. The contract for roof, I had a project that we represented clients on, seven multifamily buildings and their contract to do all those seven buildings for hundreds of thousands of dollars, one page. It was a one page contract. It pretty much said, "I'm going to reroof your buildings," and that was it. You want to do an investigation if you have any type of roof that has layers to it, as Alan said, as well, especially those flat roofs.

You're going to want an engineer if you're having trouble because, as I'll talk about later, you want to make sure you look at this information so that you gather your information and your evidence if you need to address it to a potentially liable party, but you also want to engage a confidence defect attorney because you do not want to destroy your evidence if you're going to do that. You want to make sure you gather it appropriately. And also, if you have bids that you're going to receive, it's nice to have a consultant or an architect or an engineer to help you weigh through those bids. They help you get through the minutia of it. And also, they can bring up things that you may not think about, down to the little things like safety requirements, access to the building during construction for your owners, daily cleanup, daily magnetic sweeps so you're not having nails all over the place.

Those are some of the things that you want to keep in mind when you're about to do a roofing project. The main thing is, is it just old and is it a simple roof or is it a flat roof or does it have a lot of cuts or are you having trouble with it? Then you need to do some investigation. We will turn that over to Alan now.

Jon Lemole, Esq.:

Let me just say one thing to followup on what Sal said before we jump into contractors. Look, there are many, many, many fine roofing contractors in Florida. This is not intended to denigrate any of them. But in my experience and I would venture to say Sal and Alan would probably share a similar experience, when we get called in to bring investigative, potentially bring claims relating to a roofing project that has gone not so well, has gone badly, a lot of times those are projects that did not involve... I mean, it's very rare that we would come across a project where an engineer or a roofing consultant was involved in investigating and setting up a scope of work. Sal is absolutely spot on when he's talking about and especially flat roofs. We've seen a lot of projects where roofers come in and basically covered over an existing roof or some existing components of a roof and a lot of times that's a problem, least of which... Most of which. I'm not sure which way that goes, but you're relying on that existing layer of what's there and is being covered over to watertight and wind resistant.

It may not be a water issue, folks, it may be a wind issue. Unless they've done some uplift testing to determine that that substrate that they're attaching their system to is secure, you may have a roof that's not entirely resistant to high winds and hurricane winds. Those are the scenarios that we typically see is an association has either fallen under the spell of a roofing contractor or it was decided that rather than spend the money to have investigation by an engineer and an engineer involved in setting the scope of work, they've gotten that scope from the roofer. The roofer has either come up with a solution that's not a complete solution and those associations have had to deal with problems further on down the road.

Again, it may be more money, but it's money well spent because the flip side of that is if you have a claim, you're going to be paying lawyers to bring claims. It's going to take a long time. You may be having to do a roofing project in the middle of that because you've got water intrusion that can't be fixed with spot emergency fixes. You may be doing two roof projects where you thought you'd only have to do one. With that, I'm going to turn it over to Alan Tannenbaum and he's going to talk about contractor selection and this is really important in determining how to get the best contractors to come and take care of your project. So thank you, Alan. Go ahead.

Alan Tannenbaum, Esq.:

Thank you. All right. The roofing contracting industry in 2021. I'll give some buyer beware tips. Number one, there are companies out there, they're not actually roofing companies, they are roof replacement marketing companies. They have very good sales people. They travel around the state. Their pricing is pretty good and they have a clause in their agreement that once you signed the contract, they can assign it to another roofing contractor and all these groups do is sign contractors up and then they shop that job to other roofing contractors and take a margin on it. Be prepared or be aware that you need to have actually a bonafide roofing contractor.

Secondly, if you have a particular manufactured system, you want to be sure that the roofing contractor you're considering is a qualified installer for that roofing manufacturer so that you in fact get a bonafide warranty on that roofing system at the end of the day. The third for a HIRA, especially where you have mechanical equipment, drains, air conditioning equipment sitting on the roof, you're not just hiring that roofing contractor, you're hiring the roofing contractor and the air conditioning subcontractor that it decides to bring in to lift up that air conditioning equipment so that the roof replacement can occur. There may be a need for a plumbing contractor to be involved to determine drain size. You may have ancillary repairs like stucco repair and so forth on mansard walls, so you need to qualify under those conditions not only the roofing contractor, but who the heck they're going to bring in under them.

Do not let your roofing contractor do plumbing and air conditioning work that's not within the purview of a roofing contractor. There's a limitation on it. There's an interesting part with permitting. The air conditioning work and plumbing work associated with a roofing replacement, it doesn't necessarily need a separate permit for the air conditioning work and the plumbing work, but what's required is that that appropriated licensed air conditioning people and plumbers actually be the ones performing that work, so qualify your contractors as to their ability to do the totality of the work. The best recommendations for roofing contractors come either from other association and managers, certainly the engineers and contractors will do it, will give recommendations also.

You need to qualify also the superintendent, the subcontractors who might be working on the job. For 40 years, I've been telling associations that you're not actually hiring a roofing company, you're hiring a superintendent and laborers that they assign to your job so you need to know who they're sending. You can get their resumes and qualify them and make sure you get one of their top superintendents coming out. There's a lot of good contractors who take an extra job that they don't have the manpower for and something usually goes wrong on the job where they've either hired a journeyman superintendent and now they're assigned to your job, so you need to qualify.

The most important thing besides third party supervision I think that contractors will always perform better when they know somebody with knowledge is watching what they're doing and you're likely to get better performance. But we go back to the fact that without clear plans and specifications, it's impossible to determine and compare bids. Like Sal said, if you got a one page agreement and it says roof replacement and you have a bid for $60,000 and another one for $80,000 and another one for $100,000, they're not even comparable because you don't know what they're going to do. You also don't know how well insured they are and you don't know if they've even paid their workers comp. There's a lot about qualifying a contractor beyond looking for the lowest number.

There are good ones out there. There are bad ones out there, but I had third category, which is contractors with a really good reputation who happen to do a bad job on your roof because of who they send out or they're too busy or they're subbing things out that they shouldn't. Keep all those considerations in mind. That's my nutshell there, Jon.

As you mentioned, one thing that's important is that the manufacturer may do inspection, but what they're looking for is just whether their particular product was installed the way it should have. They're not looking necessarily at the way the air conditioning systems were remounted. They may not be looking at the flashing. Their warranty is qualified to saying that our system was installed per our manufacturer specifications, but they don't give a totality specification generally for the entire reroofing project so you just can't count on that.

Jon Lemole, Esq.:

Yeah. To amplify something that Alan said, if you're getting multiple bids or proposals or estimates, it's so important to have on the front end a defined scope of work that was set by somebody like an engineer or a highly qualified roofing consultant, and there are some very good ones out there, because then you know that you're getting estimates that are apples to apples and that is key to making a quality choice. You know that if you're taking the least or lowest estimate out of three, they're all competing on the same playing field and they're all estimating the same scope of work. Certainly, the engineer or the consultant can be vital in helping you evaluate those estimates. 

Okay. Let's talk about contract drafting because that's kind of where the rubber hits the road in terms of as association being able to take some steps to really control its risk in this project being completed on time, being completed properly and without problems. We're going to a little bit of time here and walk through some key things that should be in any reroofing contract. We have a whole course, folks, that covers this. We could spend at least an hour, so I apologize in advance if we're going to run through it a little bit quicker. But if you want, you can, the next time we deliver the course, the in-depth course on repair contracts, key provisions in repair contracts, please join us. But I'm going to run through some of the key areas for contract drafting.

Sal brought up an interesting point. He said he's seen projects, and we all have. We've all seen projects where you got a pretty sophisticated reroofing project that's covered by a one page contract and I would venture to say a lot of you folks and managers have faced that situation too. On the other hand, we've seen the full AIA contract that's 15 pages long with its attending general conditions document. I'm not saying one is necessarily any better than the other, probably a one page contract is not going to cover all the bases, but do you need the full AIA long form contract? Probably not, depending upon the nature of your project and the size of it. The takeaway is not how many pages the contract is, the document is, whether it's an AIA document or not, as long as the document covers some very key elements, it can be the AIA form, it can be in a different format or template, but it's important to have a couple of very specific things, some key things that should be in there.

Let's talk first about careful specification of what constitutes contract documents. Okay. I've seen contracts that haven't clearly spelled out what constitutes the terms of the agreement between the association and the roofer. By that, I mean what is the scope of work, whether there are drawings that need to be followed, whether there are engineering specifications that need to be followed. The very first, and especially if you've spent the money to have an engineer involved or a roofing consultant involved, it's important that your contract document specify the engineer's specifications, the engineer's drawings if they've done some. If the roofing consultant has done specifications and drawing, that should be specified. If there's going to be a warranty involved, let's see the form of the warranty that the roofer is going to issue.

I'm not talking about the manufacturer's warranties, a lot of roofers though will provide a warranty on their workmanship. Well, let's see that warranty up front, that form. Let's make that form part of the contract so that you know going into it exactly what kind of warranty you're going to be getting when this project is completed. I've seen many a project where you're arguing over the terms of the warranty after it's too late. So if you have an engineer involved and the engineer has done a project manual, obviously you'll probably have a form contract that's going to specify everything that needs to be in there, but if you haven't gone that route, it's very, very important to make sure that the contract specifies what documents constitute the work that is to be done. That may rely on some others that need to be part of that.

The second main area that you'll want any good reroofing contract to address is the draw schedule. How is the roofer going to be paid? Let's think about a typical roofing company. Every morning, that owner or that general manager, whoever's in charge of running the day-to-day operations of that roofer, he or she wakes up in the morning and has to determine how they're going to staff the seven, eight, 10, 20 different project that they've got going at any one time. Okay. They're going to send their best folks to the project that is either giving them the most grief or has the highest amount of risk to the roofer. The best way that an association can control risk and ensure that that roofer has some continuing day-to-day risk on the project is through the draw schedule or through any of the provisions in the contract about how that roofer gets paid, progress payments.

You want to make sure that the way the roofer is paid during the progression of the job is in a way that that roofer is not... they haven't gotten their profit paid to them yet. There's a lot of different ways you can do that. I can't tell you a specific way, but typically you want to make sure that you're minimizing any deposits that you pay upfront because a lot of times the deposit is the profit. The more of the profit you pay upfront, the less that that roofer is incentivized to come and complete your project on time or in a diligent fashion.

If you can't get away from having to pay some sort of deposit, then you want to negotiate for the lowest amount of deposit or you want to redress that, if you will, that's probably not the right word, but you can maybe build in some retainage on progress payments and pull some of that back to ensure that the roofer completes on time and free of defects. The draw schedule is the best way to, one of the best ways, to ensure that every morning what that roofer is determining who he's going to send and where he's going to send them to, he's going to be looking at your association's reroofing project and saying, "I got to get this thing done because if I don't get it done, I'm in the hole. I'm negative here. I don't have my profit on this job. I'll earn my full profit on this job until I complete it." Don't ever give them a reason to get paid what they're going to ultimately make early on.

Alan Tannenbaum, Esq.:

Jon, the bottom line from my perspective is that you don't want the contractor that having paid 80% of the purchase price when only 60% of the work has been completed because it's awfully difficult to get them out at that juncture.

Jon Lemole, Esq.:

Right. Project supervision is another key area. Who for the owner is going to be responsible for day-to-day supervision of the project? I've seen many a situation where it's they've designated somebody on the board because they've had some sort of experience or because they've dealt with a roof replacement before. There may be some people on the board that are very qualified to do these things, I'm not saying that. But even if you haven't hired an engineer or a consultant to design your project, it's always worth considering having somebody come in, a third party come in and oversee and supervise the completion of the project and take a look at what the roofer is doing, inspect their work as the project progresses, somebody who's got experience in that area because that's usually one of the first... If a qualified person is doing that, they can nip problems in the butt obviously.

If the roof is not going on the right way, it's better to learn that early rather than later because later may mean a complete tear off and redo; whereas earlier may be, "Okay, we've got to take a section and redo it," and it's not a huge problem, so think about and have some provisions in your contract regarding project supervision. Subcontractors. Alan touched on this and especially in the area where you've got other things like air conditioning work that needs to be done, plumbing work that needs to be done, you want to have the ability to know who those subs are going to be that the roofer is bringing to do that work and you want to have some ability to maybe make some objections to that. So at the very least, you should negotiate or try to negotiate a provision which requires the roofer to tell you who else he's going to bring to the job and to allow you to have some opportunity to object or reject those subcontractors. Now, a lot of times you may not get away with being able to reject them, but you should know who they are.

Who determines completion? Does the roofer get to say the project is complete? And completion is a key element in a contract because that may determine final payment. You've got warranties that flow from that. It's evidence that maybe come back to haunt you if you ever have to bring a claim or the statute to repose, so substantial completion or completion of the project is a very important date to fix and should be fixed cavalierly. So are you going to let the roofer determine that or are you going to have an engineer involved who gets to make that decision or a roofing consultant who gets to make that decision? Obviously, I think you know what we would recommend.

How are in-project disputes handled? If you are unhappy with something that the roofer is doing, how are you going to handle that? Is there a mechanism for dealing with that? Are you going to have weekly progress meetings with the roofer? Are they going to do weekly inspections where you get to look at the work and have a meeting to review what's been done? All of that is key. Here's a biggie. Alan touched on this. Nonassignability. I can't tell you how many times we've seen roofing projects where you've signed a contract with somebody and you've got a completely different entity that shows up to do the work. If you picked a roofer for a reason, then make sure that that roofer isn't going to assign the contract or sub the work out to some other roofer. Those clauses are very rarely in contracts and so it's important that you take a look and make sure that you negotiate that into your contract.

The next thing is near and dear to our arts as lawyers, as litigators, because we usually end up dealing with the aftermath of a project gone bad and that's alternative dispute resolution. We'll often see contracts which require arbitration. We don't like those. Arbitration is not all it's cracked up to be in our experience. You'll hear that it's cheaper, it's faster, but, A, it's not necessarily cheaper because the cost to file a lawsuit at Circuit Court is, I don't know, I think like $405. On a couple hundred thousand or a few hundred thousand dollar roofing project, the filing fees at the American Arbitration Association may be thousands of dollars, plus you pay the arbitrator's fees hourly, so it's not necessarily cheaper.

I don't know, maybe faster, but you don't get discovery, you don't get full discovery, you don't get to take depositions under the American Arbitration Association rules, so that's a potential problem. Folks, at the end of the day, we don't recommend arbitration. Certainly in most cases, we would want to be in Circuit Court in front of a jury and so it's important to make sure that your contract doesn't require you to waive your right to a jury trial. We've seen plenty of contracts that we were not involved in negotiating and where we're now bringing a claim that have not had a prevailing party attorney's fee clause and that may be a problem. We would want a method for recovering our client's attorney's fees for bringing a claim for a roof project that was defective and so you need to take a look and see whether there are provisions in the contract for prevailing party attorney's fees.

Alan Tannenbaum, Esq.:

Very quickly, we want to answer these questions.

Jon Lemole, Esq.:

Final payment. How long do you have to do your final payment and release any retainage and under what conditions? That's essential as well.

Alan Tannenbaum, Esq.:

I want to get to some questions. Richard asked how to find a top notch engineer. We do know of some good ones. Do they perform the same in every job? Just like a contractor, sometimes you run into a glitch. If you hire an engineering firm, make sure the person they assign to you is actually one of their roofing specialists. Sometimes they have that capability sometimes not, but we can make some recommendations on that. I think, again, some other management companies and associations might know who they've had a good experience with. Barry asked a question about work that was done by an owner above the roof line. I bet that's an HOA, I hope it is. Who's responsible? Depending on how it was entered into and what your documents say, usually if an owner adds an improvement, it's on them to either remove it so that you can do a proper reroofing job or not, but the devil is always in the detail with documents.

Somebody asked a question about allowances and it's a very good question because, for instance, you may enter into a roofing job, you have a wood deck and there's an allowance per square foot or for board foot of the sheathing removal and replacement. Number one, you want to make sure that the price that the contractor's putting on replacing sheathing is a market price and they don't have an extortionate number for it. Secondly, you need to quantify how much, when it's opened up, how much wood actually needs to be pulled off the roof and how much is being pulled is being pulled off the roof because all of a sudden you get an overage of $30,000 or $50,000 at the end of the job and the wood that was removed has already gone into the dumpster and been taken away and how would you ever verify how much the contractor did, so that's a very good question and it ends up being a real problem.

Somebody, I think Mark [Spursion 00:53:49], mentioned that you also have to be careful of what type of products are going to be installed. There are different types of roofing systems. They carry different types of warranties. Definitely, your choice of roofers should also include vetting the roofing system that they're proposing to install because they are all different types of quality warranty limitations and so forth that come with the roofing project. There's one question about fiduciary responsibility. What is an HOA property management and board's responsibility to ensure proper funding of reserves under Florida statutes and case law? Well, the board has a fiduciary obligation to follow Florida statute and HOAs, there's no statutory requirement for the funding reserves. If it's in the documents, it is required.

If an HOA doesn't properly fund reserves, I doubt that that creates a case fiduciary for a fiduciary violation. It may be a poor business practice, but I don't think that it's going to create liability. So sorry, Jon, I thought we needed to get some of those questions answered.

Jon Lemole, Esq.:

Okay. That's fine. I want to make sure we answer the questions as well. That's good.

Alan Tannenbaum, Esq.:

Right. And we covered project supervision and completion, so Sal if you have something to say about construction defect claims that you can say in three minutes, the floor is yours.

Sal Scro, Esq.:

Yes, thanks for letting me have all this time. There was one question out there that was what about material failure on a fairly new roof? That kind of hits what I'm going to talk about. If you have a roof project, a new one that was done or one that went wrong or an existing roof that is wrong, what do you do? Well, you have four years statute of limitations to act on it, not to exceed 10 years and that 10 years is based upon when it's discovered. For example, if it's a latent defect, so the four years runs from either actual possession by the owner of the certificate of occupancy date, the date of completion of the project. If there's an abandonment of the project, which a lot of times leads to legal action, that would be the date that commences your statute of limitations. The date of the completion of a contract between the contractor, the architect, the engineer and their employer, so if you happen to employ the architect separately, then the time they've provided you with those details, that's your statute of limitations on that part of it. But typically, they're involved in larger projects so it's whichever is latest.

The statute of limitations runs four years. We're talking to community association managers here, so what do you do? You guys get complaints. You get complaints of problems with roofs, leaks, windows, anything like that, you document them because they usually come to you in writing. You talk about them in meetings, so you have meeting minutes. That documentation, what does that equal? That equals evidence. That equals evidence of your knowledge of a defective condition, which if you wait too long can hurt you, so it's good to document things, but you want to make sure you act upon them. For example, if you're having complaints of stucco cracks and you keep patching the stucco and patching the stucco. Later you find out that, well, it's not really the stucco, it's coming from the roof installation and the flashing, don't think that your discovery of that roof problem happened when you discovered it, it may have happened when you found the cracks in the stucco so it's going to be important that you investigate these issues by somebody competent to let you know, not just any contractor that goes out there.

If you see stucco cracks, you call a stucco contractor. He's going to tell you, "Okay, I'll fix your stucco." He's not going to talk about roofs necessarily and he's not going to uncover it, so it's important that you look for a competent investigator, an engineer, somebody to look into it. Usually, you go to the construction defect attorney first. That's what we do. We would recommend the right person for you to do that. One of you I know here today, we talked just recently about owner surveys and I use the word owner in quotes here. Should we send out written document... an email or a letter to all the owners and say, "Are you having any problems?" We recommended, again, if you want to talk to them, great, but if you're going to do these owner surveys, most of the time you're creating evidence, you're creating evidence that is going to probably not get you a lot of feedback and it's going to be more of a problem than it's worth.

I could talk about it for a while, but we don't have a lot of time so I want to touch on the 558 process. Before you commence any action to address construction defects, you have to give notice under Florida Statute 558 and it's specifically 558.004. If you're 20 units or less, you have to give that notice 60 days in advance. Tell them the potentially liable parties, what the defects are, what the damages are, give them a general idea of where the defect is located and they have 45 days to respond. It's 120 day pre suit notice for if you have 21 or more units and that is a 558 process for dummies statement there. There's a lot to it and it's important to use an attorney that knows how to handle these things appropriately to give the proper 558 out there.

Evidence preservation, exfoliation of evidence, destruction of evidence, that's very important. So when you're doing these investigations, it's always nice to have somebody martial it through. I know if we handle a destructive investigation, I make sure I notice the potentially liable parties. I tell them what's going to happen, when we're going to do this investigation. They can come out and look. They can't talk, they can't talk to the owners, they can't direct any of the investigation, it's our investigation. They can go out there and watch it and they can see what's there so they can't say we destroyed any of the evidence and the people you have out there doing it, it's documented. Sometimes this comes into question if you have emergency repairs, water coming in. Well, managers, direct somebody to take pictures before, during, after. Videos are good, but we don't want closeups. You got to start far out so we know what you're talking about.

I can't tell you how many times I get a picture of a round wet spot in ceiling that doesn't tell me anything. I need to have something back to look at to say, "This is the building. This is the street, the building, the unit number, the interior," and then you can zoom in on it. There's a lot to talk about on that, but the main thing is you have four years from discovery, not to exceed 10 years. So any of you with buildings or improvements that were done, any renovation projects that were done that are 10 years or less and you're not sure about their condition, my recommendation would be get a competent person to go out there, do a walk around, do an inspection. We know people that will go out there a lot of times and just do a free walk around if it's something that you think you're having a concern with.

If you're not having concern, obviously these engineers aren't readily available to run out there, but if that's the situation, it's always good to do. Thanks.

Jon Lemole, Esq.:

Okay. So roofs are your first line of defense to water intrusion. One of the most important components of your buildings. You've got reroof your building, the takeaway today is to follow best practices. We've laid them out for you. If you have any questions about a project that you may be contemplating undertaking, reach out to us or reach out to a construction lawyer to help walk you through what would be some of the key things to do in order to make sure that the project goes well. We thank you all for joining us today, you managers. I think Michelle will take care of getting you all of your credit reported to the DBPR. Hopefully we'll see you on our next panel, so thank you very much for joining us.

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The laws every Florida condo owner needs to know

"There are many statutes and regulations surrounding condominium ownership in the state of Florida. Often, you're at the mercy of your association." Click below to watch the video.

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The Smart Board & Property Manager Legal Guide Key Rules of Evidence Preparing for Court

Alan Tannenbaum, Esq.:

My name is Alan Tannenbaum, I'm here with my partner Salvatore Scro and Jon Lemole. Tannenbaum Scro Lemole & Kleinberg. We are construction lawyers who primarily service the Community Association field and our market is from Daytona Beach across to the Tampa Bay area and down to Naples, that's where we have the bulk of our client load and what we do when HOAs and condos turnover, we assist the new boards and management in analyzing potential deficiencies both from a financial standpoint and a construction standpoint.

We negotiate resolutions with developers and contractors, sometimes in court, sometimes out of court. We also act as construction counsel when an association is undertaking a major repair project and offer consulting services and drafting contracts and in helping administer major repair projects, the bulk of where our practice lies. The setup for this particular course and Michelle Colburn will handle the CEU, if you have any questions about getting your CEU's credits Michelle, you can handle those offline.

The setup for this course is the following. So right now, all of your properties, and either your board members or managers, things are happening. There's people who are maybe tripping and falling at your property. There's owners who may be fighting with each other. Somebody this month didn't pay their assessment. There's a multitude of things that can happen at your property that-

Everybody, please mute. We're hearing some backdrop there. So all kinds of things can be happening, and what you don't know as a manager, or as a board member is which of those incidents are going to turn into a claim. Well, you might find yourself a year and a half from now, a city with a lawyer, lawyers asking you to present evidence and testimony and you say, "Gee, that happened a year and a half ago, my recollection is problematic." Or, "Which issue is that?" And, "I don't have the records and so forth."

And what this course will help do is set up procedures and set up a knowledge base so that you could do the right things today and when something happens in your property, in order to prepare for the possibility that that could be the one incident that is going to end up in court where you're going to have to present testimony and evidence. So we're going to show you some basics or teach you some basics about the Florida Evidence Code. Some of the things will surprise you and we're going to talk about business records.

We're going to talk about incident reports, things that you should be doing on an ongoing basis in the end to prepare an appropriate record for court if one of these issues ever gets there. So I'm going to ask my partner Salvatore Scro to talk first about the attorney-client privilege. Who it applies to, who could waive it so that you have a basic understanding of that.

Salvatore Scro, Esq.:

Morning everyone, good to see you again. So let's start with the lawyer-client privilege and this is important because when we deal with our clients a lot of times, the question is who can know certain things, what can be disclosed, what cannot be disclosed and who can it be disclosed? So the first thing you have to know of when dealing with a lawyer-client privilege, the attorney client privileges, who is the client?

So the client can be ... The way the statute reads if it's under the evidence code which is section 90.502. The client can be any person, it can be a public officer, a corporation, it can be the association or any other organization whether it's public or private who consults with a lawyer, and this is the key part, with the purpose of obtaining legal services, or who has rendered legal services by a lawyer.

So that part means if you're discussing the possibility of engaging a lawyer, that would be an attorney-client privilege. So what can be disclosed? And one would be is what makes the communication confidential? The key is that if it's not intended to be disclosed to a third person other than the disclosure is in further in surrendering the legal services, and also to who can it be disclosed would be those people reasonably necessary for the transmission of the communication and that a lot of times means the association managers, it could mean possibly some of the employees of the association, a lot of times we will have ... We will be asked to give a presentation to owners at an owner's meeting.

Sometimes it could be all of the owners, but it's key that that privilege ends once you insert somebody who is not entitled to that privilege, who is not necessary for the transmission of the communication or who is not there that you're servicing and rendering the legal services. So one of the other things that section 90.502 speaks about is that there's no lawyer-client privilege under this section when, and this is key, the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit what the client knew was a crime or fraud.

So do not speak to the attorneys about how to get away with something if you know that it's a crime or a fraud because you're not going to have that privilege if something turns up later on. So that's the key to the attorney-client privilege is, first, that it's for the purposes of rendering Legal Services, it's not just a discussion out at a restaurant or something like that, it has to be something that is for the exact purpose of either retaining the attorney or already under the retention by the attorney for legal services, that the disclosure is in furtherance of the rendition of those services and that only to those people who are reasonably necessary for the transmission of the communication.

Sometimes that could be also the engineers. We sometimes ask that engineers be retained through our firm so that it's more of a work product. And I'm not going to get too deep with that. But there are differences between state and federal as to what is privileged and not privileged with regard to those communications. But for the most part, that's the essence of the attorney-client privilege.

Alan Tannenbaum, Esq.:

And be careful about inadvertent waivers. We've seen some groups where we give attorney-client privilege advice, and they reproduce our opinion within the body of the minutes. We get it to litigation, the other side sticks to those minutes, and we have a battle as to whether that advice or the privilege over that advice has been waived because you've incorporated your minutes. So we generally recommend that you don't put our legal opinions or anybody's legal opinion right in your minutes where they could end up being discoverable. So Jon Lemole, talk about the account-client privilege.

Jon Lemole, Esq.:

Good morning everybody, well, that ... This is pretty easy, except in one regard because it pretty much tracks exactly what Sal just told you about the attorney-client privilege. So any conversations or communications between the client and the accountant. So in your case, it would be the association, and particularly the board of the association and its accountants would be similarly privileged. And that would extend to people who also like managers who are necessary to the communications between the client and the accountant as long as there's an intent to keep that conversation or that communication privilege.

Here's the interesting thing about the accountant-client privilege. An accountant is defined in the statute, and this is for anybody who wants to geek out on, look at the statute, Florida statute 90.5055. An accountant is defined as a certified public accountant or a public accountant. Now, we've talked about that in the office many, many times. In fact, yesterday, we were talking about it again, and none of us really understand what's the difference between a certified public accountant and a public accountant, here's the best that I can come up with.

It's not a bookkeeper. I don't think it would extend to somebody who's doing bookkeeping functions. It may not extend to somebody doing bookkeeping functions, say at the management company. A public accountant at the very least is somebody who has an accounting degree and holds themselves out with themselves out as an accountant to the public. As far as I can tell, the difference between a certified public accountant and a public accountant is that a Certified Public Accountant obviously has gone through some certification process and only a Certified Public Accountant can file reports with the Securities and Exchange Commission or can do audits of publicly traded companies.

So that normally wouldn't apply to nonprofit community associations. If you're in doubt as to whether the person who is doing your financial auditing, record keeping is somebody that would be covered by this privilege, then by all means, speak to your general counsel, and ask them and get an opinion on there. And like the attorney-client privilege, it's the clients, only the client can waive it, it has to be preserved. If the client says to the accountant, "Don't disclose that." The client and the accountant can't and the accountant always has to presumptively believe that that information can't be disclosed unless somehow waived by the client.

And also like the attorney-client privilege, it doesn't extend to communications in furtherance of a crime or, wire fraud or bank fraud or something like that. So it's not any of those communications, but the regular communications back and forth between the association and its account for audit purposes, for annual audits, for tax filings, all of that stuff is generally going to be privileged against disclosure. The association should guard that privilege zealously in minutes that are going to be available to the public.

If you have decisions that are made with regard to advice provided by your accountants, you should be very careful about how you disclose that in minutes and to the extent that you disclose those communications in minutes. And again, that's something that you can run by general counsel. Easy, right? Okay. Thank you.

Alan Tannenbaum, Esq.:

Well, again, on the criminal side, it's interesting that if you robbed a bank yesterday, you can go seek the advice of your lawyer, your accountant about what you did, that conversation is privileged. If you walk into your lawyer and accountant and say, "I'm planning on robbing a bank tomorrow." That is not a privileged communication. So the aftermath is protected, the planning is not, not that anybody in this audience is planning on that, but keep that in mind. 

I'm going to talk about the husband-wife privilege in Florida. This is not directly pertinent to a lot of management issues, except sometimes you have these husband and wife pairs who let's say manage a beachfront community, it could be a little bit chauvinistic. The pattern is usually for the wife to handle the front office and the husband would be the maintenance guy, but sometimes that's reversed.

So during the marital relationship, you can't force a husband to testify against your wife or the wife to testify against the husband. So any pillow talk, there is a privilege for that. If you get divorced, the privilege still applies to the time that you were married. So if you get divorced, and you're particularly angry at your spouse, and you want to spill the beans about something, your spouse said during the marriage, they will be able to assert a privilege to stop you from doing that.

If you're in a divorce, it's no holds barred, you're able to present any testimony in the divorce and the privilege without apply in that proceeding itself. And to use the example of the breach fund manager if the wife embezzled funds from the association, the husband didn't know anything about that. And they're both charged with a crime of embezzlement and the husband needs to testify about what the wife may have said in order to be exonerated and the charge against the husband, in that circumstance, you can bring up a privileged information. Important, it doesn't apply to common law marriage, only applies to the traditional marriage, and it has not been modernized to cover husband, husband, or wife, wife. And maybe someday the legislature will get around to it.

Right now it's called ... Well, interestingly, it probably could be interpreted to cover illegal gay marriage too, but that has not been ... I have not seen the court opinion on that one yet. So Salvador, tell us about compromise and offers to settle and subsequent remedial measures. Pertinent to the Community Association field.

Salvatore Scro, Esq.:

Okay. So we see this a lot in matters we handle in the breach of contract cases, construction defect cases, things like that where there's claims against the developers or the general counsel or the subcontractors, and there's problems with the construction. The client sometimes will say, "Well, once we start, if they offer to settle, that would not be admissible." And we hear, but they know they were wrong because they were offering to pay us money.

Well, that's really not the case, they're trying to buy their way out of it. So the statute, the applicable statute if you want to look it up is and the evidence code is 90.408 and the way the statute reads is that evidence of an offer to compromise a claim which was disputed as to validity, or amount, as well as any relevant conduct or statements made in negotiations concerning a compromise is inadmissible to prove liability or absence of liability for the claim or its value.

So the key there is that there's a disputed amount. If there is an offer to compromise, that would be something that would not be admissible to show liability, it would not be admissible to show that they owed at least a certain amount of money, or the amount of money they've proposed. You will find that this happens in personal injury cases all the time and insurance company may offer to pay, that would not be admissible.

If an insurance company offers to pay in association for some claim, that's not admissible to show liability. The facts of the situation are what are admissible to show whether or not there's liability. Along with that is Section 90.407 which is subsequent remedial measures. So if somebody slips and trips and falls, say slips and falls, I'm from New York, so we're used to ice, but down here, you're not going to find that. So if somebody trips and falls on the sidewalk, and there's some impediment to walking and the association managers send somebody out there to make some adjustment or change to the sidewalk, that is not admissible into evidence to show liability.

So somebody tripped on the sidewalk, you can see to the jury or to the judge, "Hey look, they slipped and fell on the sidewalk. They knew it was a problem because they went right out there and fixed it." That is not admissible as towards liability. What there is an exception to the rule is that subsequent remedial measures, some action they have taken would be admissible if it's offered to show evidence of something else.

So if they say, "Well, this wasn't ... I didn't own this part of the property, this wasn't mine." Well, you can offer into evidence the fact that they were out there doing some repair or some sort of remedial measure as possibly evidence of ownership, or that they had control if they were leasing that area. Something to show other than the liability of the impediment or whatever the cause was that you're attributing the negligence to.

So you do not need to be afraid to go out there if something happens on the property, you do not need to be afraid to go out there and take some sort of remedial measure. You should not be out there discussing things. You shouldn't be out there saying anything like, "Oh, I knew this was going to happen." But go out there, do your job, take care of the situation, clean it up if you need to, and you can be assured that that would not be offered into evidence has something to show liability.

Alan Tannenbaum, Esq.:

And the concept behind what Sal has just described. That society needs cases to settle, the very ... If every case made it into court, the court system would be totally overwhelmed. So there's a public benefit to people being able to make settlement offers and resolve cases. And if your settlement offers were admissible in court, people would be reticent about trying to settle. And the same thing about the remedial measures, if those were admissible, manufactured items or site deficiencies, nobody would ever get them corrected because they'd be afraid that, "Well, it's going to be an admission in court of liability."

So those really are further in some cases getting resolved, and problems being corrected. The other part of it is if somebody is injured on your property, and there's a defect in that property, you can defend that first case to say, "Well, we didn't know there was a problem, and we weren't really negligent." But if you don't get it corrected, and the second person gets hurt, they now have a record it's going to make their case a lot better. So the issue is you should get items corrected that create some potential exposure.

So let's talk about what you can say or what you should say or what you should do. And let's use a trip and fall, somebody's near your dock, and they fall through a plank that was rotted, they're in pain, they're hurt, we get there, you're the manager, you're a board member. You can ask them how they feel. You can give them ... Make them more comfortable, you can call the ambulance, you can take them to the hospital. You can sympathize or empathize with their situation and it's best to do so because it's far less likely that somebody is going to sue the association if they are treated well at the time that they have a problem or an injury.

So you can write down a note that says, "I'm sorry for what had occurred, I'm sorry for your trouble, I'm sorry for your pain." That's never going to find its way into a court of law, a judge is never going to allow that in to try to prove that, "Well, they were empathetic or sympathetic. That means they must have felt guilty, that means they must have done it." That evidence will never get before a jury because again, from a public interest point of view, we want people to be sympathetic, empathetic, help them if they're injured.

But there's a very important distinction and it says right in the statute 90.4026. The statement or writing or the gesture expressing sympathy is not admissible. But a statement of fault which is part of or in addition to any of the above shall be admissible. So you've got to be very careful. You get out there and you're a manager and you say, "Oh man, it's terrible what happened to you. Are you okay? Let me make you more comfortable." And I told that board six times that they needed to get these planks fixed or the dock worked on.

Well, all the expressions of sympathy can I help you, so on and so forth are not going to get into evidence. But your statement about what the board should have done is readily admissible as an admission. So one of the things we greatly believe in is having a very discreet incident report form that you keep. For every incident, it my occur out of property. It should not talk about anything else, but the facts that were observed the statements that were made, at the time by people who were involved, time of day, photographs, but it really shouldn't get into any board policy or politics or talk about what the association should have done or should do in response to that.

It's all about what occurred to having a record of it and as you'll see later, you'll see why that type of of recommendation is important. And Sal, I'll cover the payment of medical and similar expenses because I think that's related. 

Michelle Colburn:

Okay. And, then hold on one second, then you have another question about a pool. So is it relevant if you have a pool function to have a lifeguard there? That was from Laurie.

Alan Tannenbaum, Esq.:

Okay. Let me get to those in a second. As far as a payment of medical and similar expenses. The association could pay the deductible for somebody's health insurance if they're injured. Again, any of the any of the promises to do that or the actual doing of it is not going to be invisible. So send them flowers, go to see them at the hospital, bring them a gift. If they're struggling to pay their health insurance deductible, it's certainly something the board to consider because it mitigates against the possibility that that party is really going to come against the association. So let me address a couple of the questions that Michelle has pointed out. All right, so [crosstalk 00:27:05]

Salvatore Scro, Esq.:

Alan, with regard to that pay medical expenses, what you said is important there. And this happens a lot, everybody goes to the doctor. Bedside manner is key. If you have a good bedside manner, it's less likely somebody is going to want to come after you for their piece of flesh. So it's always good to be nice. Like Alan said, you don't have to worry about certain things. As far as if you're paying medical expenses, or you offer to pay those medical expenses, that is something that ... The bedside manner is key. So keep that in mind.

Alan Tannenbaum, Esq.:

All right, let me answer Stan's question. That there's a legal opinion that the association wants to share with the owners. The reason the attorney-client privilege you want to make use of it is to protect the association from by a third party outside the community generally who would make use of that legal opinion and further a case against the association. If you get a legal opinion for instance from your lawyer about a covenant enforcement issue where it clearly expresses what the association's rights are, in enforcing the covenants, and you want to send that letter to the owners so that you can assure that your rules are going to be properly enforced.

There's really no impediment to releasing that letter. There's no downside to it. So in that case, what you're really talking about is are there instances where it's appropriate to waive the attorney-client privilege because that particular legal opinion is really helpful for the association to make that disclosure. So in that instance Stan ... Now, if the legal opinion was, let's say you had a construction defect case, and the lawyer wrote a lengthy letter talking about the strengths and weaknesses of the case.

You would not want to release that to the membership. You would not want to release that to or append that to the minutes. So the difference is can a third party who the association has got a legal dispute with make use of that opinion to their benefit? You want to protect the privilege. If it's an internal issue when there's really no downside to the large opinion being released to the community, there's less reason to protect it.

Yes and Laurie, yes, paying a medical bill does not assume any liability. So you can do that. There's a question about the condo is more liable if it holds a social event like a kid's pool party. Should they have guards there? It's a little bit outside the context of today's issue, and it would greatly depend on who's sponsoring the party. Is the association sponsoring it? Is it an individual owner who's bringing guests to the ... Put up your signage, you could probably request that they have a lifeguard on duty in order to approve a kid's pool party, that really gets a little bit outside of our field. That's a great general counsel question. So I'll leave it at that. Jon, you're going to talk to us about hearsay.

Jon Lemole, Esq.:

Yes, thank you. Folks, we probably spent ... Each of the three lawyers here probably spent weeks in law school going over hearsay rules, I'm going to try and distill what we learned in a couple of minutes here. So I hope I hit the points that are important to you all. And after 30 years of being a trial lawyer, and I'm sure other lawyers would agree with me when asked what hearsay is or is in most of us go, "Oh, I know it when I hear it." But here we go.

Let me see if I can share something here. Okay. So hearsay is one of those things that we deal with all the time, all the time in court because so much of what we know or so much of what we learn, and by we, I mean clients, people who may be testifying for the community on a certain issue, the source of that is maybe something that they heard from somebody else, or they saw written somewhere else. And so this is a very common thing that we deal with and that you all would deal with if you're in the position of having to litigate an issue before in court.

So let's talk about real quickly, what is hearsay. Hearsay in the statute is defined as a statement other than one made by the person who's testifying. So there's a person who's testifying in court about something and then there's the statement that's made by someone else who's called the declarant. But don't worry about that term, I'm in court saying that I heard or heard somebody say something, or read something that that somebody else authored or a statement in a document that I didn't see firsthand, or that I didn't experience firsthand.

So it's a statement other than the one made by the person testifying at trial. And here's the most important thing about hearsay is that it's got to be offered to prove the truth of the thing that you're saying. So let me give you a really basic example. And hopefully, this will clear it up for you. Somebody asks you, "When were you born?" You say, "In my case, I was born August 3rd 1966."

I don't know that firsthand. I certainly don't remember it. And if you do, I guess maybe you'd be a special person. But I know that because people have told me that's when I was born. Now, there's exceptions to this, certain family history is an exception to the hearsay rule, vital records. I learned this by looking at my birth certificate, that's all. That's all an exception to the hearsay rule. But that in a nutshell should give you a good idea of what hearsay is.

So anytime you're in court saying, "Well, I heard so and so say something." Or I read such and such in a report. You're going to get from the other side of hearsay objection, and then your lawyer is going to have to stand up and say, "Well, why can I ... Why is there an exception to this that I can prove here?" Let's talk about what a statement is. Okay. So talking about testifying as to a statement that's made by somebody else.

So it's repeating on the witness stand something someone else said or it's a document. I may be offering a document into evidence that contains statements of another person. So an incident report or a memorandum or a security law, gate logs, any of those things are potentially going to receive a hearsay reaction. Here's a new one, we'll have a little fun here. So here's Santa Claus and on the witness stand.

The other lawyer is saying, "So you admit that labeling my client is naughty is based on hearsay from other children, not from any actual facts?" That's just a funny way of encapsulating what the hearsay rule is. Okay, let me stop sharing this. Let's talk about exceptions. What kinds of things and I want to talk about this in the sense of what are some of the things that routinely happened with the Community Association and how you can anticipate these issues when they come up.

Okay, so the Florida Evidence Code defines divides exceptions into two instances. One where the person who said the thing is unavailable, can't find them, they're dead and therefore, you can admit certain statements that they made out of court. There are certain other exceptions that doesn't matter whether they're available now or not. So let's talk about the ones where the person whose statement you're trying to offer an evidence is unavailable.

You can always offer former testimony. So if that person is unavailable, and they've testified ... So let's suppose you have a member of your community, and you're in there, you've got an action against them for payment of assessments and this is the second case that you've had and in a previous case, you took a deposition of that person, and they said, "You know what? I'm never paying the assessments of this community, they're not going to get a red cent out of me." Then they die. You're suing their estate perhaps, to get these assessments and you want to admit that evidence that that prior sworn testimony. Well, you can do that as long as the person is not available or dead.

Here's another one that's interesting and important. Statement under the belief of impending death. So if a person is no longer available because they passed away, let's suppose you had somebody's walking on your property, they fall into a big, open, a hole in the sidewalk and after they fall into this hole and have this horrific head injury, they're lying there on the sidewalk, and they say, "I just fell into the hole. Oh my gosh, my head just went over, I'm going to die."

That statement if that person does pass away and somebody else goes into court say, "That's what he said. He said Billy tripped into the hole. That's what caused the injury, that's what caused him to die." That statement is admissible because it's a statement of a person who's commenting on the reason for their and the circumstances around their belief that they're about to die. Why is that important to a community if you have an incident? Right?

Anytime you have any kind of incident, accident at your community, it shouldn't be some ... There should be a procedure for getting out there. And having somebody get out there and record what's going on in the aftermath. What are people saying? So that you know and you can anticipate these things, and you can tell your lawyer, "Hey, be ready. This is what the guy said, somebody said, a passerby said that the person who fell in the hole said this is what they thought was this was the cause of the accident." That's all important stuff, your lawyer is going to want to know that to give you good advice on how to handle those things.

So the statement under a belief of impending death. The third one where you don't have to have ... Where the person is if they're not available, you can still admit a hearsay statement as if they make a statement against their financial or property interests. Okay, so any kind of statement which would be against detrimental to an interest that they have whether it's financial, or about their property. If they're unavailable, that stuff is deemed so important by the courts and the legislature that we don't take those statements lightly and people don't generally make them unless there's some ring of truth to them.

Okay, so those are the three areas of hearsay where you'd have to show if you want to admit those things that the person is no longer available. Now there's a whole another class of exceptions to the hearsay rule where it doesn't matter whether the person who said the thing. They may be alive and well, you don't need to bring them into court because certain types of statements ring true, they have an element ... And that's what underpins all this, they ring true there.

There's reasons to believe that people don't make these statements unless they're accurate or true or reliable. Okay, so I'm going to run through these real quick because I'm looking at the clock here. Spontaneous statements. Let's go back to the accident. Let's suppose somebody is watching this person fall into this big hole in the sidewalk, get horrifically injured, and they start yelling, "Oh my gosh, that guy just fell into the hole. He's bleeding, his skull is cracked open."

That person's statement about that spontaneous utterance of a condition or a thing that's happening, that is admissible. That person doesn't have to come to court. Somebody else can say, "I heard that person say that thing." Excited utterance, very similar to that. Spontaneous statements, excited utterances is they go hand in hand. There's statements about where somebody is excitedly, they're under the influence of this event or this condition and they're there spontaneously and excitedly utter, saying things about the thing about the condition that they're experiencing.

So again, from the association standpoint, anytime you have an incident, it's good practice to get out there and record what people are saying so that you can anticipate some of these things or it may be the opposite. Somebody may say, "Oh my gosh, that guy saw the hole, walked around it and faked it." You'd want to know that. Maybe that witness doesn't want to come to court, they don't want to be bothered, but you heard him say that. Well, that would be important to know.

So again, good or bad, know what you're dealing with, know what people are saying in incidents. A recorded recollection notes, not memorandums, incident reports. If you make an incident report while your security guard makes an incident report, it's fresh in their mind. It's got to be made in circumstances where it's fresh, it's at or near the time that the incident occurred, it doesn't have to be right then and there, but while it was fresh in their mind, they went back and recorded an incident report. Incident reports are going to be admissible, business records [crosstalk 00:42:56]

Alan Tannenbaum, Esq.:

Jon, before you move on from the incident report. So every manager and board member needs to hear this because in the introduction that I gave at the beginning of the session, we talked about being in court a year and a half after an issue occurred. And there's been a thousand things that have happened since then. And you can't remember precisely what occurred, but at the time that it did occur, you did a good memorandum or an incident report that was very factual, you could pull that report out.

It actually substitutes for your memory that, "I don't really remember it, but here's a report that I did at the time that it occurred." And that incident report or you're reading it, and then refreshing your memory. That's an exception to the hearsay rule. So that's why it's so important that the bias of the court system is recordations or recollections that are made at or near the time of the incident or the issue or there's a bias towards that evidence being admissible, versus eight months later deciding, "Well, I better write a report about that item I was involved in." That's less likely to be an admissible document for recollection eight months later. 

Jon Lemole, Esq.:

No, that's a great point. Yeah, absolutely. And when you think about the turnover that sometimes occurs in let's say with security personnel or guards, maintenance people, you may not have that person available, not that their availability matters under these exceptions, but those reports and the absence of a person a lot, that live person saying what they remember, that report is crucial. And even if you do have the person, they may say, "Well, it was a year ago, I don't really remember what happened, but I made a report about it."

Okay, here's the baby. This is one that lawyers deal with all the time and it's the business records rule or the business records exception. So anytime a company, an organization, a community association, a management company, any records that they regularly keep in the ordinary course of their business, it's a little bit more complex than that, but I'm going to distill it to those core elements. It's the regular records ordinarily kept in the course of the business of this organization and these are the types of records that this organization typically maintains or keeps.

All of those are going to come in under this exception to the hearsay rule. So the importance of this or for an association or management company is to have policies and practices around record keeping, and documentation of things. Okay, so architectural control issues. Let's say you deny somebody's request to paint their home a different color, the architectural review board denies an application. If you don't have a regular process for how you handled those requests, and the records relating to them, then you might not get certain information that's contained, or that was considered that that was discussed about that issue into evidence.

Similar thing would be security, security logs. You're logging, your security guard is logging all the cars that come in, you want to have ... That would qualify as a business record as to who came and went into the community. And so if somebody came into the community and committed a crime in the community, you could rely on that log to show, "Well, this car with this license plate which is registered to this person came into the community." I don't have to prove that ... I don't have to have the security guard come in and say, "Well, I saw it." I could put the records in and they would qualify under the business exception rule.

The key to that though is that you have to be ... The association has to be really careful and meticulous about keeping those records all the time and having policies about those, keeping those records, retaining those records. What are some of the others?

Alan Tannenbaum, Esq.:

Let's talk about assessment collection in particular because the corollary section is the absence of entry and records can also be admissible. So the reason management companies have a particular system for recording assessment payments where when a payment comes in, the software records, the receipt of that paper, or the non-receipt of that payment, you're a year and a half later trying to prove that the owner failed to pay their assessment and the person who for the management company who oversees that accounting system would be able to go in and say, "This is the practice, this is how the software works. Every payment that comes in gets recorded, gets data entry and here's a report for February of last year, and there's no showing of a payment for that particular unit."

That business record is going to get into evidence if it's properly authenticated to prove that that assessment payment is not paid, that particular employee of the management company is not going to remember for the number of associations that they're overseeing that that particular association one payment did not come in last February. But the authentication and the entry into evidence of the technology, the software and the report will get in. I'm sorry Jon, go ahead.

Jon Lemole, Esq.:

No, that's absolutely correct. And where we run into it frequently in our practice would be in how the community handles homeowners complaints or unit owner complaints. If you have strong protocols and procedures about handling complaints, that makes our job easier if we want to put evidence, a homeowner says, "I've got these huge cracks in the stucco on the outside of my building." Maybe we don't need to bring that owner in to testify about that if you've got a written complaint, and it's maintained in the regular course of the community association business and so on and so forth. So that's all really important stuff.

Admissions are always ... You hear somebody make an admission about something, then that's going to always be admissible even if the person is not there to make the admission in court. Former testimony goes without saying anybody gives testimony under oath, that would be admissible too even though it's hearsay. So those are the big exceptions, there's 20 more exceptions, but for our purposes, they're not going to be really relevant to what you all do. And we're getting near the end. So I'm going to pass it back to Alan, thank you.

Alan Tannenbaum, Esq.:

Okay, we're ask Sal, there's a few minutes we have left to talk about self-authentication in public records.

Salvatore Scro, Esq.:

Make this quick. Basically, what would concern the associations and the managers of this particular section goes along with what John said. For the most part, the public records which runs along with this, but self-authentication would be if there's something under seal or you can get a certification from the public officer that where the document is kept, it states that this is kept, and it was properly recorded. So if it's an official record, it was authorized by law to be recorded and actually was recorded, then the custodian of that can give a certification that this is a true document.

You would not need to bring in the maker of the document to testify as to the authenticity of the document. What's a concern for the management companies is just what Alan and Jon talked about, those particular documents. So an original or duplicate of evidence, this is what's coming from the statute that would be admissible under the hearsay exceptions which is maintained in a foreign or domestic location and is accompanied by a certification or declaration from the custodian of the records or other qualified person certifying or declaring that the record was made at or near the time of the occurrence of the matters set forth.

By or from information transmitted by a person having knowledge of those matters. For example, if you take an incident report, and it was kept in the course of a regularly conducted activity of the business, or entity, so you have to say, "For example, we always make these reports at times, events and incidents like this." And was made at a regular practice in the course of the regularly conducted business activity. Now, along with that, and I'll touch on this very briefly as public records.

Again, official records or documents to be recorded or file that actually were if they're authenticated as stated by the custodian of those records. So why would you need a copy of the records for example, if you have a dispute as to who has ownership of a particular condominium and you want to bring in a recorded deed or something like that? That may be an issue where you need to go to get a public record and get a certification of that public record, but for the most part, that's about where we're at on that.

Alan Tannenbaum, Esq.:

Yes, Sal, let me mention the assessment situation. If you're in an assessment collection, action, you are about to go to court, you have maybe one of the younger lawyers from the law firm showing up, please ask them if they have a certified copy of that assessment lien because a shrewd lawyer defending that unit owner with the lawyer presenting a copy of the assessment lien trying to get that into evidence can object to it on the basis that it's not a certified copy and I defended a unit or a very large assessment claim early in my career where the lawyer for the association did not have a certified copy of the lien.

We objected to it, the judge would not allow a recess and the lien count, and the ability to get attorneys fees fell with the fact that they couldn't get the lien into evidence because it was not a certified copy. So a little tip.

Salvatore Scro, Esq.:

Okay. Well, we have a few minutes and I'm sure we have some questions that we needed to address.

Alan Tannenbaum, Esq.:

There were some questions set in advance, which is better, arbitration or mediation? They actually are not ... Mediation as a settlement process. Arbitration is a situation where a private party determines a dispute and it's binding upon you, somebody who's not a judge. So we like circuit court, if you're going to take a matter to dispute to go to state court with it if the association's generally the plaintiff, but we believe and most cases end up getting mediated. So they're not really in opposition to each other. Let me see what else we had.

Salvatore Scro, Esq.:

One of the questions that came as I was speaking was, how do private emails apply to all of this? I believe that had to deal with either ... I don't know if that dealt with hearsay, or public records, or whatever, but private emails, again, if you're the one testifying in court, and the email was sent to you, then you would be able to testify as to the receipt of the email and who it was from. If you just want to introduce somebody else's email, that won't fly unless you or somebody copied on it.

You can't say somebody gave me this email, there would have to be some authentication to that. But again, as board members, you need to be careful about what you discuss through each other as a board between emails because those can be considered association records which would be discoverable. So I think [crosstalk 00:57:34]

Alan Tannenbaum, Esq.:

Yeah, we're going to answer a number of questions offline because we got a lot of good ones and we don't want to hold anybody up here. Really, the takeaways from today, get your procedures in order so that you can authenticate appropriately the business records that you might need to get it to evidence. Don't be afraid to be sympathetic to somebody injured on your property, that's not invisible. Definitely repair items that have the ability of causing further damage.

And don't combine your incident reports with opinions and policy and so forth. They should basically be a discreet document that as Jack Webb used to say, "Just the facts." Definitely recording what people said at the time, photographs appropriately marked, and so forth. So those are some of the takeaways. You could fill out the poll if you like. I see the Michelle put that up. Michelle will deal with CEU credits for all the managers, so contact her offline if you have any questions about that.

We'll try to answer as many questions as we can offline. Like I said, there were some very good ones, but this was a packed presentation. And anybody has any questions and follow up, we're happy to respond as long as again, it's within our areas of trial practice and it's construction, we're happy to respond to those. Other than that, we've hit noon.

Salvatore Scro, Esq.:

Thank you very much, good seeing everybody.

Michelle Colburn:

And Sal and Jon and Alan are available at anytime, so please feel free to reach out to them via email or me and we will answer your questions and thank you all for joining us, and we will see you at our next Smart Board and Property Manager Guide, Legal Guide in July.

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Why do we need a construction defects’ lawyer to negotiate our defect claims against the developer? Why can’t the Board negotiate on its own?

The Board can negotiate on its own, but it may not be wise. Here's why:

  1. Preservation of Warranties: For condos, steps should be taken to preserve statutory warranties, which are limited in time. A construction defects' lawyer would be attuned to these and act to preserve the warranties while negotiations proceeded. A condo board acting alone could inadvertently allow warranties to run.
  2. Not Allowing Claims to Become Time Barred: Both the statute of limitations and the statute of repose limit the time allowed for pursuit of claims. A construction defects' lawyer would be attuned to these and act to preserve claims while negotiations proceeded. A condo or HOA board acting alone could inadvertently allow claims to become time barred.
  3. Identifying Responsible Parties: Construction defect claim recovery is often only maximized where parties beyond the developer are included in negotiations. A construction defects' lawyer will identify all potentially-responsible parties and include them in negotiations if necessary to bring about full recovery. A condo or HOA board acting alone could fail to include necessary parties beyond the developer and thus hamper the association from achieving maximum recovery.
  4. Compliance with Chapter 558, Florida Statutes: This statute requires that notice to the developer and other responsible parties be drafted in a particular form and sent via certified mail. After notice is sent, the responsible parties have the right to inspect the property and request documents from the association. A construction defects' lawyer would be sensitive to the requirements of the statute and assure that the association meets the conditions of the statute. A condo or HOA board acting alone could fail to comply with the statute, prejudicing the association's position if the matter ended up in court.
  5. Preservation of Evidence: A construction defects' lawyer would know that steps need to be taken to preserve evidence, and be aware of the consequences if evidence is not properly preserved. A condo or HOA board acting alone could fail to properly preserve evidence, prejudicing the association's position if the matter ended up in court.
  6. Determining the Settlement Value of the Claims: An experienced construction defects' lawyer will have significant experience in valuing claims and be able to advise the board on what would constitute a fair resolution. A condo or HOA board acting alone could fail to recognize the value of the claims and as a result aim too low or too high in negotiations.
  7. Negotiating Prowess: A experienced construction defects' attorney can present the claims in their best light and direct a negotiating strategy maximizing the association's leverage. Furthermore, just the appearance of an experienced construction defects' lawyer leading negotiations for the association is a clear message to the responsible parties that the association is serious about securing a fair settlement. A condo or HOA board acting alone would not nearly be as formidable in conducting negotiations on behalf of the association, leading in many cases to mediocre offers by the opposition.
  8. Making Sure the Settlement Paperwork is Right: Once a settlement is reached, it is customary for a settlement agreement to be drafted. A construction defects' lawyer will negotiate terms which best protect the association, including not waiving rights to pursue latent defects which might arise post-settlement. If the settlement involves remedial work, protections would have to be incorporated to assure adequate performance, including the establishment of warranties for the repairs to be performed. A condo or HOA board acting alone would not be aware of necessary settlement clauses to be included and others to be avoided.
  9. Justifying a Settlement to the Owners: Owners, either at the time of settlement, or even years after, may challenge the adequacy of the settlement reached. A Board will be in a much better position to justify the settlement reached if it is a able to report to the owners that an experienced construction defect lawyer was there every step of the way in advising the Board, including that the settlement reached were reasonable.

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What is the appropriate role for a Transition Committee?

While a Condominium or HOA deed-restricted community is in its sales period, the developer will control the operation of the governing condominium association or HOA by appointing the majority members of the Board of Directors of the Association. Often, either through the impetus of the developer, or organically through the efforts of interested owners, a transition committee of owners will be formed during developer control to begin preparations for the takeover of association control by the unit/lot owners.

Motivating the Developer to Meet its Turnover Obligations

With a recalcitrant developer, sometimes it is the role of the transition committee to remind the developer of its turnover obligations both as far as the timing of turnover and the documentation which is required to be turned over by the developer at the time of transition.

Information Gathering

The primary role of a transition is information gathering. This can be from various sources. Under both the Florida Condominium (Chap. 718) and Homeowner Association (Chap. 720) Acts, unit or lot owners are entitled to request and inspect a myriad of association documents including contracts, financial information, and board and association minutes. Documents and records pertaining to the community can also be accessed. These would include the development order for the community on file with the municipality or county involved, building department records and correspondence, and records retained by the applicable water management district.

Interaction with Governmental/Regulatory Authorities

The pre-transition period is an appropriate time for a transition committee to introduce itself to county/city and other regulatory officials. Often there is a completion bond placed by the developer with the county or city. The transition committee is in the position to educate local officials on what requirements have not been met by the developer in order to justify the release of the bond and to embolden local officials to condition the release of the bond on the completion of these requirements. For water management districts, there are sometimes compliance issues which the developer may have failed to address which the district can be reminded of in the hope that the district will push for compliance while the developer remains in control.

Condition Inspections

The transition committee can inspect the common areas of the property and provide a list of construction concerns and more to the developer. If such a list is provided, it should be made clear that it was compiled without the assistance of third-party experts and is not intended to be all-inclusive. The developer is free to undertake the repair of items on the list. The transition committee, however, should not in any way be representing that it is "signing off" on any of the repairs, as it lacks the authority to do so.

Promoting a Slate of Candidates for the Initial Owner-Controlled Board

Because the transition committee has put in the "sweat equity" to discover and understand the challenges which will need to be confronted by the owner-controlled board upon transition, it makes sense that the transition committee should run and promote a slate of candidates for the owner-controlled board upon transition.

What the Transition Committee Should Not Do

The transition committee does not have the authority to settle anything with the developer. It should avoid "signing off" on any lists of repairs/actions by the developer, or purporting to bind the unit or lot owners in any way. The committee is a voluntary group of owners with no recognized authority and in its communications with the developer and others the committee should reiterate this.

Conclusion

A transition committee can serve a valuable purpose in reminding the developer of its obligations, preparing the community for transition, and empowering governmental and regulatory officials in holding the developer to account. The committee, however, should scrupulously avoiding overstepping its authority or purporting to approve any proposals put forth by the developer. 

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Elite Attorney Honorees — SRQ Magazine

 SRQ Magazine names Tannenbaum Scro as one of the Honorees for their Elite Attorneys issue.

Click here to view the full SRQ Magazine article

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No more excuses, North Port code hearings resume Thursday

NORTH PORT — The coronavirus excuse may no longer work.

North Port this Thursday resumes its code enforcement hearings, a court-like setting for those breaking, ignoring or contesting ordinance rules.

Code enforcement was interrupted in March, then slowly restored over COVID-19's smackdown that closed city hall and suspended many such services.

North Port's last code enforcement hearing in February was highlighted by a woman ticketed for letting her chickens roam the neighborhood. She won that case.

Thursday's hearing at city hall, however, has pages of backlogged code violations in some stage of resolution. Violators face Hearing Officer James E. Toale, a Sarasota real estate lawyer. His job as judge balances North Port's rules versus people's rights. Hearings in normal circumstances run on fourth Thursdays, 10 months of the year.

Toale's looking at nine pages of cases when things get rolling at 9 a.m.

The ultimate goal is correcting code violations, said Kevin Raducci, the Code Enforcement division's manager. He has four city inspectors, one vacancy.

"The last thing we want to do is take (violators) to court. We're not about fining … rather fixing, trying to work with people."

There's plenty happening Thursday. For instance, one man was ticketed for an unlicensed gym in his garage, others for cutting trees without permits, not cool in North Port, a Tree City USA town.

And others are cited for junked stuff laying about their property — tarps, mattresses, paint cans, busted furniture, pool supplies, plastic jugs and a pit with half-burned trash — illegally parked cars, trucks and a forklift, missing address numbers, other miscellaneous code violations.

Those who don't comply are given property liens or fines, all others returned to good standing.

Inspectors will get complaints or tips, but they work a beat and understand city codes, Raducci said. He rotates routes to keep things fresh. The inspectors first issue courtesy notices and tips for correcting violations. The violator has five days to respond, time to comply.

Penalty fines escalate quickly for those skirting the rules, however.

The inspectors also respect your rights. They're not allowed, for example, to peer over your fence, but may look through one. The may also view your place from neighboring property.

Inspectors are badged, wear a name tag, a black pullover with the city's logo on it and they drive a North Port Neighborhood Development vehicle. Anyone with less gear or demanding payment should get a door slam and be reported, Raducci said.

Click here to read the full North Port Sun article

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Condo and HOA Turnover – It’s Like Purchasing a Business Except . . .

 Typical Due Diligence in Purchasing a Business

If you ever been involved in purchasing a business, you likely know of the concept of "due diligence." If there is physical plant or inventory involved, you would be foolhardy if you didn't inspect the property, equipment and inventory. Certainly nobody would buy an ongoing business without looking at the books, and going over the numbers with their accountants. Then, of course, once there was a level of comfort with the physical plant, equipment and the books (and, of course, the purchase price and terms), you would take the deal to your lawyer and have your lawyer draw up a purchase and sale agreement with appropriate representations by the seller as to the accuracy of the information provided.

Consider that the transition of a developer-controlled condominium association or HOA is in many ways akin to the purchase by the unit or lot owners of a business, often times a very big business.
There is physical plant transferred certainly. Assets, financial records and audits are supplied. The incoming Board of Directors is responsible for all of the duties and responsibilities for operation that the exiting Board was responsible. What's the difference? Little due diligence.

Sure, the owners may have had a seat on the developer Board. But for most developments, that lone owner representative was left out of the loop on pertinent information and was outvoted on the key decisions regarding operation. Individual owners may have requested information as they were entitled to by Chapters 718 or 720, but most often complete information was not provided. As far as engineering or accounting review, rarely do transition committees raise money voluntarily to secure engineering or accounting studies pre-transition. As far as legal, some counsel advise transition committees gratis, but primarily the advice concerns how the transition process is supposed to work.

Typical Due Diligence in Taking Over Control of a Condo Association or HOA

The reality for newly transitioned condominium associations and HOAs is that the new Board has limited information upon purchase ("transition") about this business ("community") it now has the responsibility to operate. It is not too late for "due diligence" however. The incoming unit or lot owner Board of Directors by statute (Chapters 718 and 720) has a fiduciary duty to the owners. To meet this duty, consider that it is incumbent upon the incoming Board of Directors to perform after purchase (transition) the due diligence that in a commercial setting would have been done pre-purchase.

It is in the context of "due diligence" that forensic engineering and accounting investigations should be ordered, general counsel retained to assist in getting operations and compliance in order, and turnover counsel retained to assist in the choice of the forensic engineering and accounting firms, determining the scope of the investigations, and pursuing relief from the seller ("developer").

Can Due Diligence Wait?

Can the due diligence wait, after all we the incoming Board of Directors has a lot on its plate the first year without having to spend time and money "looking under the hood?" The simple answer is that it really can't wait. First, with repair and maintenance of the common property being the foremost obligation of the association, a timely engineering study is an essential tool for the Board to perform its oversight, planning and budgetary functions on repair and maintenance. Second, warranty periods and statutes of limitation affecting potential claims may be at risk of expiring. For condos, the main developer warranty is tied for projects with buildings more than three years old to discovery of defects within one year of turnover.

Summary

Condominiums and deed-restricted developments are big businesses, sometimes multi-million dollar businesses. By statutory and documentary design, until sale ("transition"), the seller ("developer") holds all of the cards. It is only in the period after sale ("post-transition") can the incoming Board of Directors take steps to ascertain the cards the owners have been dealt. This is after-the-fact due diligence, but given this design, the Legislature and the courts have provided associations with recourse if the developer has left the community with deficits, be they infrastructure, regulatory, building or financial.

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Force Majeure — Covid-19 Impact on Major Repair Contracts (VIDEO)

 Understand how Covid-19 restrictions can result in a repair contractor claiming more money or more time to complete under a Force Majeure ("Act of God") clause of the contract.

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The Conundrum of Aging Florida Condominiums — Repair or Abandon?

In the early 80's, Robert Crain, a well-known engineer in the condo construction defect world, was asked by HUD to opine on the anticipated useful life of condominium buildings built in Florida. His conclusion was 50 years. Especially for a number of beach-front condos built in the 1970's, engineer Crain seems to have predicted well.

The definition of useful life that I will use for purposes of this article is the point where the cost of trying to rehabilitate a structure becomes excessive making demo and reconstruction, or even abandonment, the better business decision.

The challenge with Florida condo buildings reaching the end of their useful lives is that condo associations are highly regulated, and boards and management in dealing with aging buildings are constrained under both statute and declarations of condominium.

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