Connected Townhomes Administered by Florida HOAs

Alan Tannenbaum, Esq.:

Everybody. We're going to try to keep everybody on mute during the presentation. To keep the crosstalk down. We will have an opportunity at the end to answer some questions. If you have questions, send them through the chat feature. We do look at them and hopefully we can get to them.

For those of you who this is your first session, we're Tannenbaum, Scro, Lemole and Kleinberg. We're construction lawyers. We spent a lot of our time representing homeowner and condominium associations first in investigating and pursuing turnover claims for groups that have come through turnover and even some properties that are a little bit more mature but less than the 10 years of age of the buildings, which is what the statute of repose is in Florida. The absolute deadline to pursue construction defects is 10 years. You're a manager and you've just taken over the management of a property that's 9.5 years old and is having problems, please let the green lights go off to know that you might have to get some advice pretty quickly.

The other part of our practice involves construction consulting on major repair projects. We do that for a lot of groups. Our market is from the Space Coast across to just north of Tampa Bay, Hernando and Pasco and down to Naples. We stay out of South Florida, that's to prolong our careers. We stay out of North Florida because it's too difficult to get to. 

All right. We've got to mute there. We'll get started. Connected townhomes, and I'm going to include duplexes in there. It used to be that that type of building, where you had multiple units combined, where every unit started as a ground floor unit, it used to be when they built that product they created it as condominiums.

Until probably the late '90s you had duplexes and connected townhomes, developers placed them under a condominium regime. The advantage of that was the owners owned their unit, everything else was common element and the maintenance and repair obligation was on the condominium association to maintain all the common components of those type of structures. Common mechanical, common electrical, common structural.

If you built a duplex or a connected townhome and it's in a condominium and you have foundation problems, it's the association's responsibility to fix it. If you have roof framing problems, association's responsibility. Certainly the roof. Anything that's not in the unit is typically in a condo, the association's maintenance and repair responsibility. It's actually a system that's worked very well since the first condos were built in Florida in the '60s, which is how maintenance and repair is divided in a typical condominium situation.

Developers I think in the late '90s came up with this brilliant idea, it was brilliant for them, for nobody else, of placing duplexes and quads, and sixplexes and eightplexes all connected buildings under an HOA regime. Now why did they do that? Well, under the Condo Act, if you're a purchaser of a condo unit you have statutory warranties that apply to that sale, they can't be waived by a developer. They're very broad warranties. The warranty is not only from the developer but it's from the general contractor, the subcontractors and the suppliers. Very unusual warranty. The legislature stuck that in the Condo Act in the '70s and developers have tried to amend it out and they've never been successful. If you the developers don't want to give statutory warranties, they look for a way to not be a condo and instead stick these buildings in an HOA regime.

Condominium documents have to be approved by the state. You make a filing with the state, they check your documents against what the statutory requirements are. Sometimes developers got to go through three or four revisions to get their documents through. There's no such review for an HOA set of covenants, conditions and restrictions. There's no submittal to any state agency for approval. It's a fairly easy process, which basically once you get your land use done, file the CCRs and you're on your way. Much different in a condominium regime. Condos are much more heavily regulated, if you've ever measured the thickness of the Condo Act versus the HOA Act, you'll see the Condo Act's much thicker, there's a lot more operational requirements than for an HOA. Again, you have a state agency that administers condos, does not administer HOAs, so a developer has a much tougher regulatory scheme with a condo.

There's also a very interesting statute that's in the Condo Act, which is 718.124, which simply says that a cause of action on behalf of a condominium association cannot begin to accrue until turnover. You know if a condo turnover is delayed that all your causes of action are preserved until turnover and then you have usually four years, let's say, for a construction defect after that. Very conveniently, legislature left that out of the HOA act. There's no savings clause in an HOA act, and so if you have a turnover that's been delayed, there's properties out there, many of the managers probably know of them, where turnover occurs 17, 18 years after the original development started, and it causes a real problem as far as statute of limitations and so forth. Developers in an HOA don't have to worry about that.

There was a lot of economic reasons why developers started to stick these duplexes, and quads, and sixplexes, and eightplexes under an HOA regime. Here's the, it caused a huge problem. I'm going to at this point turn the mic over to my partner, Salvatore Scro, and he's going to talk about the maintenance and repair dilemma that was created when developers chose to stick this type of product under an HOA regime.

Salvatore Scro, Esq.:

Good morning everyone. Thanks for joining us again. I wanted to just touch, I know some of you deal only with condominiums, and interestingly enough, I'm going to share a screen here with you. This here was a condominium, is a condominium. Interesting enough, the way the declaration read, the interpretation by the contractors and the developer was that this was an apartment converted to a condominium, was that the owners were responsible for their own balcony. Even with a condominium sometimes you have some issues that you have to make sure, if you have a poorly drafted declaration with regard to limited common elements, it's important that you look at that. That was one of the battles we had in this.

Believe it or not, I mean, imagine if you are the bottom unit and you need to repair yours, you're kind of responsible for everybody up above you. The same at the top. What happens if you repair yours and you add weight, and unfortunately beneath you will have these type of issues. That's what was in this particular condominium. It was a poorly drafted declaration, but just imagine if each owner had to repair their own balcony in that situation.

Let's talk about the connected home owner association buildings. Here you have, this is a eightplex here. You can see where they tried to cover over the cracking stucco, all the spider cracks throughout the stucco. If the association is responsible for painting the exterior, and one unit has a stucco problem, ironically they all have stucco problems in this one, that needs repair, how is the contractor going to assure that his work is resistant to the weather elements when the unit adjacent is going to have old, defective stucco? It's virtually impossible.

What if you start taking apart some of this building here and you find out that there is defective sheathing? Well, you probably can replace the sheathing on the one unit, but I don't think that they put the sheathing on where it stops at one unit and continues with the next. The same with the framing. How would you replace framing or sheathing that carries over to the unit adjacent to yours? The answer is you can't.

I don't think the rot knows where one unit begins and the other one ends. It's going to continue its way. If you're experiencing problems with your unit, one issue again is what if you're experiencing problems with your unit but the source is from your neighbor unit? Here we go back. Here you have issues here, other issues that you may have. We showed this in our last one, some of these, and I cut them short here. If you have issues with some of the windows and it's leaking onto the other units, what are you going to do? Can you force your neighbor to repair them? Can you make them pay? Sometimes a declaration will direct some of these things, sometimes it will not. It's very important that the building envelope and the building foundation should be the responsibility of the association so that it can be done properly, it can be done as one.

Other issues that you have are that insurance may not cover it. If you have construction defects, and I have plenty of slides that show that, I didn't put them on here. If you have construction defects, it's typical that the insurance will not cover a construction defect. They will cover damage from an event. They will cover damage from hurricanes. It'll cover damage from a tree falling. If they determine that you have defective construction, it's unlikely that the insurance company is going to cover that.

Everything that affects the building, whether it be the foundations, the plumbing, the electrical, the HVAC, if you have gas in some instances, but usually not in these connected units. Everything enters the building envelope. That means that there are going to be penetrations through the building envelope that are the possibility for water intrusion that will lead to deterioration of the building, and that should be something that is uniformly addressed by the association. How do you do that? You do it by amending the declaration to make sure that it provides for repair and maintenance of the building envelope, the building exterior. Sometimes they exclude windows, even windows though sometimes should be the responsibility of the association.

The foundation should be the responsibility of the association. Could you imagine if you have a settling problem with your neighboring unit and they're going to either do nothing about it or they're going to do some sort of repair and it affects your building or your unit? How is that going to be addressed? Maintaining these buildings should be the responsibility of the homeowner's association as a whole. I don't know if I could say much more about it than that. I know I'll be talking about when you do that later on as far as the benefits of doing it as a whole.

Alan Tannenbaum, Esq.:

I want to add something at this point for clarity's sake. With a condo, you have a statute that defines the responsibility of the association for the common element. Then you have a developer lawyer who drafts a set of condominium documents, which have to be consistent with what the statute requires. It's very clear what the declaration has to say about the division of responsibility.

In the HOA world, an individual developer lawyer who's hired by a developer to prepare the CCRs or the documents for a particular development designs this line of demarcation between association responsibility and owner responsibility. We've seen enough documents to know that they're across the board. There are eightplex documents that say, for instance, the association's responsible for painting only on the exteriors.

The roof, we were dealing with one that said the association's responsibility is limited to roof coating, which is not defined, but the owners of the sixplex had to decide among themselves when the roof needed to be replaced how that was going to be done. You have HOA documents that run the gamut from a good set of documents that very much mirror let's say what the Condo Act requires as far as the maintenance and repair line of demarcation, to ones that the association has very minimal obligation for maintenance and repair.

You literally have owners, because some connected townhomes are like three stories high, you have owners who are responsible of doing exterior repairs and structural repairs three stories high on their own. Portions of the structure that might tie right into their neighbor's structure, you could see that it's a colossal mess and there's no state regulation of it. I don't know where developer's lawyers come up with these documents, but again, we've seen them across the board. All kinds of anomalies got created.

Anyway. Jon Lemole, my partner, is going to talk about what the anomalies are as far as even investigating defects, depending on what the documents say.

Jon Lemole, Esq.:

Good morning everybody. If you've been on these panels with us each month, you know that one thing that we firmly advocate here is the use of engineers and other professionals to investigate both at turnover and if you have a major repair project. It's always good practice to engage engineers to investigate your buildings, to investigate the work that needs to be done in a repair project so that you can have a good spec developed and delineate exactly what work you need to do.

Let's take the turnover concept a little bit further in this context. I always say, if you're buying a house, you'd never rely on the seller to get you an inspection report. Who would ever do that? Who would take the seller's inspection report as the basis for determining whether or not to buy a house? In a homeowner's association a lot of times that's exactly what happens.

You have a board at turnover, qualified people, well meaning people, but people who are about to be invested with a very large and important fiduciary duty to manage this association. These folks are coming into possession and having to make decisions about millions and millions of dollars of infrastructure, of capital, improvements, building exteriors and things like that. It's a perfect opportunity to do a thorough investigation of site improvements, buildings, especially in connected townhome situation. The buildings, the building exteriors, the roofs. It's also, if you're going to do that, a perfect time to take a look at your declarations. Because the association doesn't have standing to investigate and spend money, the board doesn't have the opportunity to spend money to investigate areas that it doesn't have maintenance and repair obligations over.

Similarly, in a repair project, let's suppose you're doing a re-roofing project, and take the example that Alan just talked about, where you have a declaration that says roof coverings. You're doing a roof replacement, I'll even show you a picture. I have one here I can use to illustrate. Let's suppose that in the process of doing this roof replacement on this building, and this is a typical let's say eightplex townhouse, the roofer uncovers a substantial amount of rot. That rot goes down into the trusses, the framing of the roof. Well, now you've got a roofer that's going to be looking at that and having to expand the scope of work to include removing a significant amount of the sheathing, not only the sheathing but also doing some significant structural repair to the roof. If your declaration doesn't cover that, it only covers the roof coverings, that puts the association in a real quandary for a couple of reasons. Can you do the work? Can you spend the money to do the work?

Secondly, you haven't done an investigation, if you haven't done an engineering investigation you didn't know this going into it and you didn't do this type of investigation because you didn't have standing to do this investigation. Now you have a situation where you've got these necessary structural repairs and you don't have any specification for it, and you may not have the standing to have an engineer actually take a look and do some more investigation, take some of this sheathing off, look at the nature and extent of it, how far does it go? What is the spec that needs to be performed to correct this problem?

The delineation of the maintenance and repair obligation of the association in the declaration, whether it's just for basic turnover, a critical turnover inspection, or in delineating what is the scope of a major repair project, such as a re-roofing project, it's critical.

I'll give you an example. I don't have a picture of this, but let me tell you something from real world application. We had a case where we were investigating extensive building leaks in a townhome community. When we got into doing some testing of the buildings, we found that a lot of the problems were emanating from windows. In fact, what the developer and the general contractor had done is they had basically made all of these, taken single windows and butted them together to create double window units. They failed to, where they joined the two windows, which some of you may know is a mold window, they didn't do that joint properly. They didn't do the mullions properly and there was water that was getting all back in behind the windows, down into behind the stucco. It was creating a lot of problems. When we started to open those stucco, do some destructive testing, we saw that a lot of the framing underneath the stucco was completely just rotted out, obliterated. It was like dust.

Now the problem here is that in this community the windows and the window frames were not within the maintenance and repair responsibility of the association. All of a sudden we have a situation where you've got major problems being caused by windows throughout the association causing problems to areas that the association did have maintenance and repair obligation, and it was a little bit of a quandary. We solved it. I won't get into too many details. It involved an amendment of the declaration to cover those things to enable the association to make those repairs. 

Alan Tannenbaum, Esq.:

Okay. Here's a practical dilemma. The association, let's say in this instance, only has jurisdiction over the roof covering, finds this. There may be no mechanism in the documents for the association to be able to require that owner to correct these underlying problems. What does the association do? Do they put now the roof covering over this mess, which will assuredly fail, but there may be no mechanism in the documents to require the owner to do that.

The other problem here is let's say that the feet title or the boundary on one portion of this roof ends let's say at one of those, looks like tiles, the next tile is on the adjacent owner's property. How do they decide between them as to how that's going to be investigated, how it's going to be repaired? What if the adjacent owner, it's in an estate, tied up in an estate battle? You can't even get an answer from somebody about participating. Many of the documents have no guidance at all on how those adjacent owners are going to make those repair and maintenance decisions. It's a multi tiered problem. Again, the documents are across the board so there's all kinds of different dilemmas for each little project. Anyway. I interrupted you, Jon. Keep going.

Jon Lemole, Esq.:

That's all right. I think I'm getting close to my allotted time, but I'll show you something else real quickly. Here's a situation where you have what was and definitely appears to be significant water intrusion damage that's really showing within the unit. This is a garage, but which is emanating from, again, some other portion above, and it may be even the next lot owner's window being flashed improperly. You can imagine the problem that this creates because this unit owner, this lot owner is having significant damage inside their garage that needs to be corrected. It may be emanating from somewhere else that's not even part of their unit, it's outside their unit and at the exterior of a different unit. Yet nothing can be done about it. You've got very unsatisfied unit homeowner here who's looking at anybody and everybody to fix the problem but may not be able to get relief from anybody. This problem is just getting worse.

Well, let's suppose that this is really coming from a flashing problem, or a stucco problem, you can bet that they're going to want to hold the association to task for that, and the association may be saying, "Yeah, but in our declaration we're only responsible for painting the exteriors because that's what it says." It doesn't include windows. It doesn't include anything other than painting and it leaves it completely open to interpretation. Now you have a huge conundrum, which whenever you have huge conundrums it generally opens the way or paves the way for litigation and claims, and everybody pointing fingers at everybody, and that always means money in legal fees that's going to be spent typically by the association.

What we're advocating here is that it's always good practice, and there are two key points if you have never done it, turnover being one of them. If you're going to undergo a major repair project these are always opportunities to look at your declarations and really have a conversation about what makes sense for the association to cover in terms of maintenance and repair. Don't always assume that the developer has done something which is enlightened, smart or in the association's best interest.

Alan Tannenbaum, Esq.:

Jon, and we touched a little bit on insurance coverage, but the insurance anomalies are that, first of all, the insurance industry has not figured out how to insure a townhome community where the association has repair and maintenance responsibility for some items and not for others. What kind of policy do you issue for that kind of community? The risk is that the association's coverage will be broader than its maintenance and repair responsibility.

If somebody has a problem that's caused by a unit issue that an owner had an obligation to maintain, yet the association's coverage is called upon to pay the claim, and you have a terrible situation of your insurance company covering a claim that the association has no control over the source of. Then a real opportunity to get canceled the next year because you have a claims history and the insurance company realizes that the source of the problem is actually not under their client's or their insurance control. Really tough issues that are following this maintenance and repair dilemma.

Let's go into another issue, which is sometimes these townhome communities have very severe construction defects and there's a desire on the part of the owners to get some recompense from a developer for those problems, but you have documents that don't cooperate. Brian Tannenbaum now is going to talk about the challenges for pursuing responsible parties when you have documents that have very scattered repair and maintenance responsibilities. Are you here, Brian?

Brian Tannenbaum, Esq.:

First of all, there's no obligation by a board to sue a developer or a contractor to get the cost of repairs recouped. If a board wants to undertake all the repairs and do it on their own, that's absolutely fine. If you would like the developer or the contractors to share in that cost of the defects that they're responsible for, it's important to amend your documents because there's an important rule of civil procedure, which I will put on the screen right now, which says ... Can you see that okay? 

All right, so what it says is, "A homeowner or a condo association, after control of such association is obtained by homeowners or unit owners 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 ..."

One is the common property area or elements, so that for an HOA is just going to be roads, any lawns, anything that's a common area. Importantly, number two and number three says, "The roof or structural components of a building, or other improvements." Importantly in this parenthetical it says, "In the case of a homeowner's association being specifically limited to those improvements for which the association is responsible." If your documents do not give the association responsibility for repair and maintenance of an aspect that has a construction defect that a developer or a contractor would be responsible for, you do not have standing under rule 1.221 to sue as an association. The same for number three.

Importantly, what that does is it allows the association to bring the claim, rather than if you have a sixplex, an eightplex, having those homeowners try to bring those claims either together or on their own, which can lead to expensive legal fees, expensive costs. It also doesn't resolve what happens when you recover. If you have six owners who recover a lump sum from a developer or contractor, there's nothing that controls how that money is spent, how those repairs get done. It just leads to more problems and more litigation.

Alan Tannenbaum, Esq.:

To give a concrete example. We represented a townhome community, sixplexes and eightplexes in Pasco County, where about eight years after the buildings were developed really severe ridge cracking developed at the second floor. It was first floor block, second floor wood frame. It was determined that the major driving force in the stucco cracking was deficiencies in the roof framing of these connected townhomes. Association did not have maintenance and repair responsibility over the roof framing. In fact, it said just building painting, so they didn't even have jurisdiction over the stucco system. Massive repairs needed to be done to the framing on 25 buildings, and we told the association, you don't have standing to pursue this claim, or you could try a common law class action, which is very cumbersome.

Brian Tannenbaum, Esq.:

Right, and I have, just for an example. If you think this is small, I have the common law class action rule on the next slide, which looks like that.

Alan Tannenbaum, Esq.:

All right. Well, very complex, difficult. Sometimes it takes a year to get class action status under a 1.220 class action. Whereas 1.221 you have automatic standing. In order for that group to pursue its construction defects, it had to amend the documents to put the roof framing and the exterior wall system under the jurisdiction of the homeowner's association. They did that and then they pursued a successful case. People have asked us, "Can you amend the documents eight years later to put the maintenance and repair responsibility with the association so that you then have standing under rule 1.221?" The answer is yes. We did it. We've done it. Nothing in the rules says that you can't create standing by modifying the documents to match what the rule and procedure requires.

The rule and procedure was created by the Florida Supreme Court specifically to deal with connected townhomes because it was an issue as to what the standing was. The Supreme Court is ahead of a lot of associations because the Supreme Court said, "You have standing, but you better have documents that support your using the rule." Many communities don't. If you want to get recovery in the most convenient way by far, the documents have to be amended so that the association's maintenance and repair authority is expanded to cover an area of the building or a component of the building that may be defective. Good job, Brian. Okay.

Brian Tannenbaum, Esq.:

You had a question about insurance in the chat. About using the HO6 policy, the condo policy, why you wouldn't want to do that.

Alan Tannenbaum, Esq.:
Well, that probably came from Dave McMahon. Dave, you want to talk about that for a moment and we'll make you a special guest star here?

Dave McMahon:

It's a tough one for us. At the end of the day, we really struggle with communities, and quite frankly I kind of walk away from it when they are connected and they're not insured like statute 718, because we do know chaos will ensue when a catastrophic event occurs. The finger pointing will happen. The responsibility of rehabilitation of the property will take much longer. The integrity of the rehabilitation is in question. We don't know if the unit owners are insured correctly. There are no appraisal on the entire property. It becomes a conundrum of insuring that property correctly when you have two, four, six, eight units together.

Many of the ones that I do do have changed and amended their documents to become very similar to mirror the insurable responsibilities to statute 718 in order to bring the fiduciary responsibility of the board to light so the rehabilitation of the property, it's significantly better doing it that way. They feel better in sleeping at night that they will have a community after a problem, like a tornado or a hurricane, versus the other way in which many of these are being done.

Alan Tannenbaum, Esq.:

Yeah. I mean, if you think about it, let's take a worst case scenario that a tornado causes major devastation for a sixplex. There's no statutory guidance as to the insurability of that building. If the insurance proceeds come in, who decides how the building's going to be rebuilt? You've got to have six owners who are going to agree on that. What if the insurance coverage doesn't cover the entire rebuilding? How do those six owners agree on funding the gap? Again, what if one of the owners is incapacitated, on safari in Africa, whatever they might be?

Can't even get in touch with them. Then you have the possibility of up to six insurance adjusters each insuring a part of the building.

Dave McMahon:

Essentially what will happen, and this is a problem, I'm 100% confident that if we had the six or eight unit owners lined up, they would all have different policies. Different limits to the policy. What will happen is the adjusters will pay for the limits that the insured had signed up for. If it's not enough, the unit owner is going to be assessed. Now it becomes do I have enough money to repair correctly? One unit owner wants to repair correctly, another one doesn't have enough money. The proceeds from their insurance are not going to cover it. They will pay into what the limits say on the policy, period.

From there it becomes very difficult what engineers you get, what contractors you get. One wants to do it correctly, another one has to pay for what they could afford. It becomes very difficult. I really have only seen chaos out of this, and consequently I'd rather walk away from insuring it than be a part of the tornado that occurs after everybody starts pointing their fingers at each other.

Alan Tannenbaum, Esq.:

All right. Well that's very helpful. If you haven't figured it out, Dave is one of our great insurance agency partners. Not a partner in our firm, but a vendor that we deal with regularly. Now we're getting a little bit behind, so we're going to cut some of these short. I'm telling my partners because we have 17 minutes left. Sal, talk a little bit about economy of scale in undertaking repairs and the benefit to having the association be the contracting party versus owners.

Salvatore Scro, Esq.:

Anybody that's walked into Publix, what's the first thing you see? The buy one, get one table. It's common sense that the bigger the purchase, the better the price. That's no different when you're doing repairs to a project. There's other things to consider as well. I'll just put a list up here of some of them. Can you read that okay? I hope. These are things that some of these things have to occur no matter what, and some of them, because you're taking on the project as a whole, as a community, rather than each owner by owner, there's a benefit to it.

Typically, what's called general conditions in a project, there would be supervision, either by the general contractors, project manager or superintendent, depending on the size of the project. You're going to be paying for the labor and time for these people. Depending on the type of project, they may need a job trailer, so you're going to pay for them to bring their equipment in. If it's one unit, you're paying for it. If it's 100 units, or 30 units, or 400 units, that price goes down. The time may go up further because you're extending the time to do all the work, but overall it's more cost effective. Storage of supplies. If you're going to be doing a project on your own and they have materials, where are they going to put them? Are they going to put them in your garage, on your roof? Where are these materials going to go? It's just one of those things that helps when you're doing this as a whole.

Transportation for material and the management. There's a cost for transportation, and you know today those costs are skyrocketing. All of these things, it's nice when you can spread them out. Clean up, that's another thing. They're going to put in time every day. I'm sure plenty of you, if you've seen work going on, you may have grabbed a nail in your tire or something. It's the responsibility of the contractors to make sure they clean up daily. That's an added expense that they're going to charge you for.

These things here I'm not making these up, these are in the cost quotes. When we work with clients in construction defect cases, these are the things that people ignore. These are the things that the defense and the insurance companies don't realize are out there. You may have a $2 million repair project for an association and $500,000 of that is incorporated in all of these things. They do get expensive, and they are things that people forget about. Landscape repair.

Alan Tannenbaum, Esq.:

Sal, let me give an example. We had a duplex community under HOA regime in Sun City. The first major windstorm shingles blew off the roofs throughout the project. The replacement of the roofs was on the duplex owners, so you had each duplex owner, the two owners had to agree what are we going to do about this shingle roof problem. Imagine, because there was some engineering done and the engineer said, "This is the worst shingle job I've seen, and all of these roofs need to be replaced. None of them can beat the wind load requirements of the code." Imagine what a roofer would charge on a per roof basis versus a roofer who got the job to do 150 re-roofs. All of the things that Sal is talking about, the economy of scale built into each one is going to be a much greater, the cost per building is going to be significantly less. Sal, that's just a example that we ran into that hits on all of these issues.

Salvatore Scro, Esq.:

I'll wrap this up here just with a couple things that are different. You can see all these things. One of the important things are scaffolding though, every time you have to put it up and take it down. If you're doing a multi unit building and each does it on their own, they'd have to set up scaffolding for each unit. Versus if you do it as a whole, it's in and out with the same scaffolding. Some of the things that you don't realize are the permitting. You can do permitting all at once, that saves you some time and your engineering costs, things like that. Insurance, as far as insurance, that's another added benefit. Not only the insurance that you may have covering any defective work, but the insurance that you may have to pay to cover if there's any hazard that occurs during the construction.

One of the things that you may not do on your own, or even if you're just one or two units, is you may not employ an owner representative. You may not employ somebody to be out there to supervise a project, to look at the materials, to make sure that what you've ordered is delivered and is actually there. To make sure that they secure the materials when they go home for the day.

Then one of the things too, it may be typically it's either not available or it's not financially feasible on a single project, would be a bond, Whether it be a performance or a payment bond. The bigger the project, the more protection you can have.

Alan Tannenbaum, Esq.:

Sal, one thing that's not on the list is that if you're going to have a contractor re-roof 150 roofs, you actually have the ability to afford a construction lawyer to help you with the review of the contracts and getting a good contract. Where an individual owner replacing the roof, it's not cost effective to hire their own lawyer for a re-roof job, so that's not going to happen. Anyway. Quickly on to Brian Tannenbaum, who's going to talk about some safety concerns with owners doing their own repairs sometimes three stories high.

Brian Tannenbaum, Esq.:

All right. Well, if you have owners who are doing repairs on their own without any kind of consistency, what you're going to have is you're going to have different contractors, different employees of those contractors, different subcontractors doing work on different parts of buildings. What that means is if you are in one unit of a building and your neighbor is doing construction work on your building, you may have contractors that don't have worker's comp, you may have contractors that don't have the required permits, and they may be damaging your building, or they may be opening you up to liability for any injuries that occur while on your property. I think that's a [crosstalk 00:47:31].

Alan Tannenbaum, Esq.:

Can you imagine everybody having their own lift? Company coming in with their own lifts, they're going to be damaging paving. Landscaping's going to be damaged. The association has no control of it, and I can tell you the liability with having a contractor taking a lift up to a third story for each individual owner is a ridiculous mess.

Dave McMahon:

I'd just like to say, Surfside was another tipping point on how insurance carriers are looking at high rises too. The game is changing and can't say enough about having the experts involved in looking over everything because Surfside, we're going to see ramifications of that in legislation, but Surfside definitely was a tipping point for high rises. Insurance carriers are looking at them significantly different than before.

Alan Tannenbaum, Esq.:

Yeah. That could be impacted. Jon, I left out the aesthetics. Talk about project aesthetics and the issues real quickly that can be caused if owners are doing their own window replacements and exterior stucco work and so forth.

Jon Lemole, Esq.:

Yeah. Well, I would venture to say at some point if we've ever been over to the west coast everybody's seen these duplex communities that have multicolored roofs between the two units. That's probably not what the original intent was, but that's how it was set up.

Roof coverings usually isn't a problem because usually developer declarations can at least cover roof coverings. Let's take a stucco situation. You may have a problem where a unit owner has to do some stucco repair, which is in association with whatever, repainting or what have you, and a lot of times there may be architectural features on the stucco which they don't like, and so that may be changed, and you may have a hodge podge throughout the building of different qualities of stucco work, of different architectural flourishes, which certainly wasn't what the intent was. Let's face it, aesthetics are important to market value.

Windows are hugely important. Look, folks, proper window installation is a critical part of the building envelope in Florida. I can't tell you how many times when we investigate water intrusion there's problems with the window flashings, and that's a big cause. How many associations put windows within the control of the unit owner? You may have all kinds of different windows, all kinds of different contractors doing good work, not so good work, and that can create problems for other owners next door, down below. Because water travels, water usually goes the path of least resistance and it may wind up two units over, it may wind up down below, it may be in that person's garage like we saw in the earlier picture.

In order to maintain the integrity of the buildings, these are the types of things that the declaration should have in them to maintain consistency, uniformity and the ability of the association to do a good job in its fiduciary obligation, the board in its fiduciary obligation to maintain the buildings and to get good insurance, as Dave said. You have real insurance problems where you don't have solid declarations and a clear understanding of what the association's maintenance and repair obligations are.

Alan Tannenbaum, Esq.:

One of the things that is pretty obvious through this all is property value impact. You have owners doing their own repairs, it's going to affect aesthetics. You're going to get known as a project that has leakage problems and you're leaving it to the owners to resolve them. Eventually the word's going to get around and that community's going to suffer from a property value standpoint.

Let me tie this all together, because the last part of this in six minutes. Now that we've told you all the problems, we're lawyers, we're problem solvers. We're going to spend six minutes on problem solving. Here's the solution. The solution is, you have the ability, according to what the documents require as far as percentage of owner approval, to amend the documents, to correct all of these anomalies. You can create a set of documents that basically mirror the chapter 718 Condo Act line of demarcation between owner repair responsibility and association responsibility.

In a condo, for instance, if you have a mechanical component that's only serving that one unit, or electrical service that's serving one unit, or any of the mechanical electrical that's in the unit, typically the owner's going to have maintenance and repair responsibility over that. Anything that's common, that's a shared structural, mechanical, electrical, is going to be the association's responsibility.

Our recommendation is that the maintenance and repair responsibility be moved over to the homeowner's association to as closely match what would typically exist for a condominium association. Now, we have announced this in public meetings and we've had groups say, "Oh, so you're trying to turn us into a condominium." No. You're still going to own your townhouse, and fee simple. It's not going to affect title to anything. This is just altering the maintenance and repair regime to something commonplace. What I've often told people is the condo method of dividing repair responsibility has been in existence in Florida for 50 years. It's worked. There's a lot of things that don't work with condos, but that has worked, the division of maintenance and repair responsibility. Why not adopt that in the amendment?

Now, the one interesting thing that you can do also is you can exclude things. We've told groups, let's say you have garage doors. People always back into them. They don't always do that, but they sometimes do that. Exclude the garage door. Maybe the association would be responsible for painting it, but if an owner backs into their garage door, leave that problem to them. Front entrance door, maybe the same thing. If the front entrance doors people have different colors of those, leave those out, let the owners have replacement and repair responsibility for that. You might have some architectural control over it, which you can do. There's things actually you can leave out.

What we recommend is that you get a architect, or a contractor, or engineer in, look very carefully at the documents, and the question to ask them, what makes sense as far as the line of demarcation between the association and the lot owner? That will then be the guidepost for modifying the documents to meet that.

A lot of problems get solved with the amendment. The ability to pursue claims. Economy of scale. The ability to have problems appropriately investigated. The aesthetics will improve. Property values will be preserved. It corrects a lot of ills.

The groups that don't do it, 10 or 15 years from now, maybe earlier for some of them, you're going to have huge issues. If a storm, hurricane or tornado, hits any of these properties where the maintenance and repair responsibility is misplaced, and therefore the insurance coverage is misplaced, you're going to have massive battles, a lot of litigation between owners. Either clean them up and have an opportunity for a successful project, or leave them be and you'll have a guaranteed mess, if not today, down the road. That's where you sit.

Brian Tannenbaum, Esq.:
It's about assessments and maintenance fees, aren't they going to go up?

Alan Tannenbaum, Esq.:

Okay. That's a great question. We've been asked this. Well you're talking about now raising assessments to meet a new maintenance and repair challenge. Here's what you tell the owners. Somebody's going to pay for this. Somebody's going to pay for the repair and maintenance of these buildings, it's either an owner coming out of their own pocket to pay a contractor or an engineer, or paying an assessment so that the association can do it.

The reality is that the cost per unit, almost guaranteed, will be less if the jurisdiction for repairs is turned over to the association on common issues, because the association's going to be able to take care of issues on a per unit basis less than an individual owner will be able to. Somebody's got to pay, it's just the method of payment and who's doing the work and contracting. Yes, assessments will go up. At the same time, the amount of checks that an individual owner writes out of their own pocket to a contractor is going to go down. The savings is going to be more so on the association side if they have maintenance and repair responsibility.

All right. Well we've hit 12. We'll stay on for a couple of minutes if anybody has any particular questions. I can't seem to see the whole chat, so I have to rely on Brian Tannenbaum to tell me if there's any more questions.

Brian Tannenbaum, Esq.:

Yeah, there's one more question about where the common elements begin in a condo. Exterior wall-

Alan Tannenbaum, Esq.:

Well, typically the owner's responsible from their interior paint in, and typically the association has a responsibility for everything else. That's a typical division of responsibility. Again, it could easily apply to an HOA. There's some variations on the theme. There's some crazy condo docks that, as has been pointed out, say that the owners are responsible for placing their windows. We have 10 story buildings where in a condo the owner's responsible for replacing their windows and sliding glass doors, which is an abysmal situation because when they leak guess who gets wet? The two units underneath.

Those documents need to be cleaned up. Some of the older groups, they'd never seem to clean them up because an owner just spent $25,000 replacing their windows and they're saying, "Well, I'm not going to agree to change the documents. I just spent the money." It's problematic with some groups who are a little bit older. Thanks for taking our poll.

Brian Tannenbaum, Esq.:

Yeah. Another question for you. Could the owners request that the developer make some of these changes before turnover?

Alan Tannenbaum, Esq.:

Well, developers by design want to put as much of the maintenance responsibility on the part of the homeowners so they can avoid 1.221 and that class action procedure. It's going to be very rare that a developer is going to agree to the transfer of that responsibility and then open themselves up to the potential that now they've created a convenient class action for the association to pursue them. You could try, but I don't think many developers are going to agree to clean that up. Certainly worth a try. All right everybody, we're going to conclude. Thank you for taking our poll. Hopefully this was helpful. It's a battle the industry is fighting all over Florida. It's affecting insurance agents, contractors, engineers, lawyers, managers.

One of the things for management companies, if you go through an amendment process, be sure that your management contract is adjustable to account for the greater degree of responsibility that the management is going to now have. Probably most management companies that are handling HOAs should have clauses in their contract that say if there is an amendment that greatly increases the association's maintenance and repair responsibility that the price per door just went up to accommodate for that increased responsibility. Word to the wise to all the managers out there to certainly account for that. You don't want to get your $3 door and all of a sudden you're in the building maintenance and repair business and your company's losing money. We don't recommend that.

Okay everybody. Thank you.


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