Association restrictions a welcome relief from ineffective city ordinances?

 

 

Last Christmas I took my young niece and nephew to visit a house in western Broward County that is very celebrated for its holiday display. As promised, the house was ablaze with lights, the grounds were filled with toys and other scenes designed to entrance young visitors and even an outdoor movie screen had been set up to play Disney Christmas movies.

 

Not surprisingly, my niece and nephew were delighted and my husband and I also saw the charm although we both looked at the narrow cul de sac packed with cars and trash on an empty lot and overflowing to the neighbors' surrounding homes and said simultaneously: "nice but not to live next door to this."

 

It turns out I did know someone who lives in this cul de sac and they lamented about having to deal with the issues not just for the Twelve Days of Christmas but starting in September and running through January. While it is easy to paint anyone who is not fully supportive of a 5-month holiday celebration that draws tens of thousands of visitors steps from your front door as "anti Christmas and anti kids" the reality can be quite different. Try getting an ambulance through during one of the more active nights and you might just need Santa's sleigh to take you to the hospital. On a less serious note, plastic displays that look lovely at night can look cheap and unappealing in the unforgiving light of day and particularly to that new homebuyer inspecting a property in mid October when a holiday display is not an expected sight.

 

According to one report, the homeowners previously lived in a community association but when their increasingly lavish display became incompatible with the association lifestyle the decision was made to move to a home outside the parameters of a mandatory association.

 

While many people critique association rules and regulations, the folks on that Plantation cul de sac who have been unable to obtain help from their city officials might just embrace them come September!

Read the Sun Sentinel story here:

 

 

http://www.sun-sentinel.com/news/broward/fl-plantation-christmas-lights-20130512,0,7701237.story

 

 

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

What individual owner behaviors pose a safety and security risk for your community?

If you live on a farm with the nearest neighbor miles down the road, the following behaviors may impact you and your family but they are not likely to hurt anyone else. However, choose the same behavioral path with the nearest neighbor separated by only some drywall or a fence and the result can be much more harmful.

• Smoking: The biggest issues right now with smoking in multifamily buildings concern secondhand smoke and its detrimental impact on health. While that behavior certainly falls within the category of personal conduct impacting others, another possible impact is burning down the building if you fall asleep while smoking. More than one celebrity has died with a lit nicotine product in hand; no need to add innocent condominium and cooperative owners to that list.
• Candles:  Most people love the smell of scented candles as an enhancement to a home's ambiance. However, that beautiful scent can soon turn to the smell of acrid smoke if the candle lights nearby objects on fire. Burning candles requires some form of vigilance and people who live next to candle aficionados hope that vigilance is utilized.
• Questionable taste in guests: Tell people who they can and can't have in their homes as guests and you are certain to encounter a vigorous debate if not an outright fight. However, some guests and occupants do create safety and security problems for the entire community particularly when those guests and occupants engage in domestic violence. Registered sex offenders and sexual predators also do not make the most welcome guests in shared ownership communities for all the obvious reasons.
• Poor screening of renters:  It has always amazed me that some people care very little about screening the people who will be living in their home. Perhaps in some cases, it is naiveté and in others perhaps the property was intended to be a rental so the owner lacks an emotional connection to it. In any event, owners who fail to find out who is moving into their properties put their neighbors at risk for reasons outlined in the questionable guest category above.
• Poor screening of workers:  It might not cross some people's minds to find out who is cleaning their home, cutting their lawn, working on their roof, serving as a caretaker for an ailing parent, etc. If these folks are working on your isolated farm, that is one thing. If they are working in a community and they are intent on mischief or wrongdoing, that lack of foresight and screening also becomes your neighbors' problem.
• Reckless driving: Driving an ATV on  country back-roads might result in no harm other than some frightened critters. However, in a crowded community, reckless driving on HOA roads or in the condominium association's parking garage or parking lot can result in injury or death.
• Noise/Nuisance:  Some might argue that cranking up the decibel levels with little to no soundproofing to shield your neighbors can result in hearing loss. If nothing else, the noises you make at odd hours could certainly result in your neighbors losing sleep.
• Not addressing water leaks: You know better than anyone if there is water entering your unit on a steady basis. If you contend it is your association's responsibility to repair that leak, you still have a responsibility to mitigate your damages (and that of your neighbors) by stopping the water entry if possible. Allowing water to sit in your unit can create mold which can spread quickly throughout a multifamily building.
• Pest infestation:  If you know you have bugs in your property, do something about it. If you live in a single family home in an HOA and find out you have termites, failing to address that problem can spread to your neighbors' homes. If you live in a multifamily building and have refused to allow the association to perform routine pest prevention in your unit, you are putting your neighbors' homes at risk when the pests in your place decide to check out the neighboring digs. 
• Dogs and Choice of Breeds:  I remember the case years ago about the woman killed by a particularly aggressive dog breed, the Presa Canario, in her building. This is not an indictment of certain breeds but some dogs do need more exercise and places to roam and have more aggressive personalities. Those breeds are not the best choice when you are living in a multifamily building where you share space in the corridors and elevators with others. Some may not even be the best choice when you live in an HOA and share common park space and other green areas. Leash laws should naturally be obeyed at all times no matter how much you love Sparky.                                         

Many of the more insidious problems in shared ownership communities involve people forgetting what it takes to be a good neighbor. If none of the behaviors above concern you, perhaps that farm is the place you ought to be!

 

 

 

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Speedier Bank Foreclosures in Florida thanks to recent legislation!

Another important victory for Florida community associations occurred during the 2013 Florida Legislative Session! HB 87 - Mortgage Foreclosures by Representative Kathleen Passidomo (R - Naples) has passed the Legislature by a 36 to 13 vote! The third time must be the charm as this year finally saw the passage of this much-needed relief after failing two years in a row.

 Far too many associations have been held in limbo waiting for banks to foreclose on delinquent properties in their communities. HB 87 will give associations a new tool in the form of an Order to Show Cause to force banks to proceed expeditiously with their foreclosure actions unless they can produce a compelling reason they cannot do so. Of course, if an association is already renting out property to which it took title and does not wish to speed up the bank's foreclosure, it should not avail itself of this new Order to Show Cause tool. However, for the vast majority of associations who cannot rent out delinquent properties in their community either because they have not taken title to those properties or those properties are not in rent-able condition, this bill will provide an ability to speed up the bank's foreclosure action.

The highlights of this bill include:

• Reduces the time period within which a lender can seek a deficiency judgment from the current 5 years to 1 year.
• Requires that the lender's complaint disclose certain facts and confirm the availability of certain documentation supporting the lender's right to foreclose in order to ensure that the foreclosure can be successfully prosecuted.
• Makes it harder for parties seeking to set aside or challenge a final judgment of foreclosure in order to safeguard the quality or character of the title to the property.
• In the case of an owner-occupied residential property, the amount of a deficiency judgment may not exceed the difference between the judgment amount (or in the case of a short sale, the outstanding debt) and the fair market value of the property on the date of sale.
• A condominium association, cooperative association or homeowner's association may request an order to show cause for the entry of a final judgment in the bank's foreclosure action in chambers and without a hearing.
• The order to show cause shall set the date and time for a hearing to show cause and that hearing date may not occur sooner than the later of 20 days after service of the order to show cause or 45 days after service of the initial complaint.
• The order to show cause shall state that the court may enter an order of final judgment of foreclosure at the hearing and order the clerk of the court to conduct a foreclosure sale.
• The court may enter a default against the lender if it fails to appear at the hearing to show cause, fails to file defenses by a motion or by a verified or sworn answer or files an answer which does not contest the foreclosure.
• Allows for the granting of attorney's fees for the order to show cause if the mortgage provides for reasonable attorney's fees and the requested fees do not exceed 3% of the principal amount owed at the time of filing the complaint.
• The provisions of this bill apply to "all mortgages encumbering real property and all promissory notes secured by a mortgage, whether executed before, on, or after the effective date of this act." However, the order to show cause provisions "apply to causes of action pending on the effective date of this act."
• HB 87 takes effect upon becoming law which means that the date when the Governor signs it or lets it pass into law without his signature is the effective date of the foregoing provisions.

The mortgage defense attorneys and their clients have already mounted an effort to urge the Governor to veto this bill. We have been waiting a long time to give associations a greater say in the mortgage foreclosure actions that have been pending, in some cases, for years. We are in the homestretch with relief on the way. If you would like to send a message to the Governor about this bill you may email him at:  rick.scott@eog.myflorida.com.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

My time on my HOA Board

One of the first questions I ask legislators, candidates seeking a job with my firm and vendors who sell services to community associations is: Have you ever served on your community's board of directors?  

How can any of us really know what a volunteer director job entails if we have never filled that role?

I served on my homeowners' association board for two years and that was almost ten years ago. Prior to me, my husband served on the board and prior to that, other residents who were lawyers were recruited to serve on the board in the hopes that a legal background would somehow assist the board.  I am not sure how much that  theory was borne out in reality but my experiences from my time on the board have stayed with me and I believe have made me better able to relate to my association clients and their daily issues.

  

Our HOA board meetings were all held in the various directors' homes and they were not well-attended. Occasionally, a resident with a specific request such as an exterior modification would attend and then leave after his or her item was discussed. Usually it was just the five of us alone discussing what needed to be done. The director hosting the meeting usually laid out coffee and refreshments. Although we were in comfy surroundings, we were there for business purposes and most of the directors were all very well prepared. My first year we had a director who really did not understand that the "job" entailed actually reading the minutes, attending meetings and performing the tasks assigned to him so he quickly tendered his resignation when he realized that our self-managed community (we did not have a professional manager and still do not to this day) meant  managerial and operational tasks fell on the directors' shoulders.

I was the only woman on the board and more than two decades younger than my male counterparts. Some memories of my time as a director are fairly vivid:

• I was initially asked to become the secretary(with one director suggesting it was a natural fit given my gender) but I declined that offer.
• One director was focused mainly on planting live oak trees in every home's front yard, claiming we had a landscape maintenance easement to do it. When I countered that the easement did not quite give us the liberty to undertake this project to the extent he desired nor was the entire community in support of it, this director suggested I resign from the board. I again politely declined that offer.
• We had a resident who was unhappy with a violation letter he received requesting he put a door on his mailbox. He parked a car that was meant for the junkyard on his swale in protest. Eventually he moved his car and his mailbox to this day remains without a door.
• We had zero delinquencies during my entire 2 years on the board.
• We spent less than $1,500 in legal fees during my entire 2 years on the board.
• We threw four well-attended social events each year which continues to this day.
• We directors did not all agree with each other but we did listen to each other.
• Our board meetings tended to last well over 2 hours and that was with no one in attendance!

When my term was up, I did not run for re-election. I suppose working in the community association industry made it less appealing to go home and work again as a volunteer director. Even so, I am grateful for my time on the board. It made me much more empathetic to the problems and complaints I hear on a daily basis from directors, managers and residents. 

So what did I learn during my 2-year tenure on my community's board of directors?  I learned that some of my fellow directors had engineering, managerial, entrepreneurial and other skills of which I had no idea previously. I learned that most of my fellow directors were very nice people who were serving on the board because they felt it was their duty to "give back" to the community in terms of their time and skills. I learned that there are bullies on boards just as there are bullies in the schoolyard and they should be dealt with the same way. I learned that serving on the board can be boring, exciting, frustrating, gratifying, enlightening, mystifying, easy and difficult depending on the circumstances.

I am grateful to those who serve their communities well and for the right reasons.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Owner sues HOA Board for failing to preserve restrictive covenants

Occasionally, I will hear from an older Florida homeowners' association that is considering allowing its restrictive covenants to simply expire by application of  law. In some of these communities, there is not much in terms of common areas to maintain and insure or the entire concept of a mandatory association has lost its appeal. A new case out of the 4th DCA involves an action centered around an owner’s legal standing to compel the HOA’s Board of Directors to proceed with the “Preservation” of the Association’s restrictive covenants in compliance with Florida Statutes, Sections 720.05 & 720.06 in order to preserve such covenants from being extinguished under Florida Statutes, Chapter 712 - commonly referred to as the Florida Marketable Record Title Act (“MRTA”).

The very recent case of Southfields of Palm Beach Polo and Country Club HOA, Inc., et al v. McCullough may make some boards who are otherwise inclined to ignore the effects of MRTA to reconsider. In this case, Victoria McCullough, a landowner in the Southfields equestrian community, filed a complaint in Circuit Court claiming that the Association’s board was refusing to preserve the Declaration by failing to record the permissive notice of preservation allowed under Florida Statutes, Section 712.05.  McCullough requested an injunction and a writ of mandamus to compel the board to file the required notice.

McCullough relied on the fact that in 1981, the Association’s governing declaration was recorded to impose certain covenants, conditions, and restrictions within the Southfields community. The declaration stated that its “provisions hereof shall be liberally construed to effectuate the purpose of creating a uniform plan for the development and operation of the Property.” The declaration created a homeowners association whose stated purpose, according to its articles of incorporation, is “to provide for the regulation, maintenance, and preservation of the development of Southfields.”

The Court determined that the declaration was intended to preserve the equestrian nature of Southfields which thereby required that the board exercise its powers to maintain the declaration until and unless ninety-five percent of landowners vote to dissolve the declaration and disband the Association.

The trial court granted summary judgment as to both the prayer for injunction and mandamus.  The Appellate Court agreed with the trial court’s conclusion that if parcels were to drop out piecemeal without the requisite votes required by the governing  documents, the Association would begin to resemble a piece of Swiss cheese, with portions of Southfields covered by the restrictions and other portions not otherwise covered by the restrictions. The Appellate Court also agreed that the language of the declaration itself made it clear that the board of directors is mandated and has a duty to protect Southfields and the restrictive covenants running with the land.  Finally, the Appellate Court agreed that injunctive relief, as well as, mandamus relief was appropriate to compel the board to fulfill its duty and take the required action to preserve the declaration.

The Appellate Court noted the Mandamus relief is ordinarily used to compel a public official to perform a ministerial duty, but that neither party raised an appellate issue whether mandamus is appropriate to compel a homeowners association to act.  The Court pointed out that mandamus has been approved to compel a corporation to act,  citing, Faro v. Simplex Med. Sys., Inc., 748 So. 2d 342, 342-43 (Fla. 3d DCA 1999).

Some older HOAs have drawn criticism for attempting to preserve or revive older covenants that will be or have been impacted as a result of MRTA and now some older HOAs are being criticized for not being proactive in protecting and preserving those covenants. This falls under the category of not being able to please everyone. For older HOAs that have a unique lifestyle connected with their community (for Southfields it was equestrian, for others it may be communities with age restrictions, a golf course or waterfront lifestyle, etc.), the issue of their community's character being tied to and defined by the restrictive covenants makes the board's decision to preserve or not to preserve a more important one.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

The Tax Man Cometh for Associations Too!

Each of us is undoubtedly thinking about our own personal tax returns with April 15th upon us. However, board members have to think about tax time twice: personally and on behalf of the association.

 

Hopefully, every association has retained an accounting professional to guide them throughout the year and, in particular, when it comes to preparing the association's tax return. I reached out to Monte Kane of Kane & Company CPAs (industry experts in Florida) to give some insight into this process.

 

According to Monte, condominiums and HOAs file either standard Federal corporate returns, using Form 1120, or if they qualify for the "primarily residential" test, they can file the Federal Form 1120H.  When an association files an 1120H return, it does not file a Florida income tax return. However, there are pros and cons to filing the 1120H which you should discuss with your CPA. Co-ops generally can only file an 1120C.

 

While we all dread April 15th, an association's return is due on the 15th day of the third month after the year end. A calendar year association's federal return would thus be due on March 15th with an ability to extend filing by 6 months.

 

Any officer of the association can sign the association's tax return but he or she must understand what is being signed which is the same requirement when a personal tax return is being signed. A community association manager should not sign the association's tax return unless he or she is an officer of the association.

 

While a shared ownership community association is a not-for-profit corporation that does not confer tax exempt status. Associations are taxed and they can be fined/penalized for not paying taxes timely and/or for not filing their returns timely.

 

Associations occasionally do receive a tax refund, usually when an association is required to make estimated payments and those amounts exceed the actual taxes owed. A refund may also be due and owing where an amended return is filed due to the fact that a prior accounting professional was not aware of certain specific elections that a board could make and/or was unaware of certain IRS Revenue Rulings. The accounting professional you choose to guide your board counts.

 

Some areas that require expert assistance include:

 

• Income resulting from settlements of construction defect and other lawsuits
• Reserves for contingencies can pose tax issues
• Understanding what is subject to State Sales and Use Tax
• Be familiar with Revenue Ruling 70-604 and have your members take an annual vote to approve it (this can save the association taxes on excess income)

 

Lastly, Monte reminds us that associations can avoid or reduce taxes with proper planning. He cautions, "We have seen too many associations where rules are not followed and the Board is exposing themselves in the event of an audit. Remember, boards are fiduciaries."

 

 

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Community Association Turnover from Developer Control: smooth sailing or rough seas?

Just how easy or difficult is the developer turnover process?

At some point in every community’s lifespan, the developer will (hopefully) finally exit and the association members will take over the reins and chart their own destiny. There are certain statutory triggers that require developers to relinquish control of the board in stages but does that always happen?

Every community has their own story in this regard. I recently heard from a community that was developed in 1986 that is STILL under developer control. Other communities have reported experiences where little to no documentation was turned over to the members the night of the meeting or even months afterwards. Other communities struggled for years to pick up the pieces after discovering extensive construction defects. Developers would be well advised to make the turnover process a lot more palatable so the final impression made is a good one.

When the day finally comes that the developer is prepared to leave the community, can the members be certain that they are receiving all the documentation to which they are entitled?

Is the process made smoother by the creation of an Ad Hoc Committee of concerned owners and hiring a lawyer to guide that committee and communicate with the developer as to the membership’s expectations? After transition occurs, association members often make the sobering discovery that things are not what they seemed to be while the developer was still in control. Contracts entered into by the developer may not have been true arms-length transactions; assessment amounts might have been kept artificially low; monies may be missing from certain accounts; and the construction may not be as sound as one would have hoped.

The Community Advocacy Network (CAN) has released a 5-minute Developer Turnover Survey which can be found online from April 4th through June 3rd.  http://CANsurvey.questionpro.com.

Come share your honest feedback and rate your turnover experience with our 5-minute questionnaire—no matter how long ago your transition took place. Your responses will aid CAN in identifying long-term problems and providing support and solutions for condos, co-ops, HOAs, and other types of communities either facing or still reeling in the wake of their own developer transitions.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.