A discussion of routine & complex issues which confront all types of shared ownership communities.
Wednesday, March 31, 2010
His tree hangs over into my yard.
Her parties are too loud.
Just when should a community association board of directors intervene in a dispute between neighbors? It is human nature to want to get other people to side with your point of view. This is often the case when the combatants live inside a community association. The feeling is often that the party who has the board’s backing in the dispute has the rightful claim.
If the dispute is an obvious personal matter between neighbors such as an encroachment upon personal property, the association’s involvement would be improper. In fact, if the association did become involved in such a dispute, other owners would certainly object to the use of common funds to engage in such involvement. Other times it is not so obvious whether or not the association’s involvement is warranted.
If an owner complains about a neighbor’s loud parties and music, the board should find out if other owners similarly find the noise obtrusive. If other owners agree, then the neighbor’s behavior may have risen to the level of a general nuisance which is prohibited under the terms of the association’s governing documents. If a neighbor’s behavior violates one of the association’s rules or restrictions then it is incumbent upon the association to enforce the restriction against that owner. Upholding the documents is, after all, one of the board’s primary functions.
The matter becomes even more complicated when one of the combatants happens to be on the board and even more so when it is the President. Naturally, board members should resist the urge to use their position on the board to direct legal counsel to pursue personal matters. It becomes harder for a board member to do this when dealing with engaged and active fellow board members who will vote down any proposed action that appears to be personal rather than proper association business.
Neighborly disputes can quickly turn into community-wide conflagrations if not handled properly.
Monday, March 29, 2010
I live in a homeowners’ association in western Broward County. Inside that community is a well-known private country club that boasts an 18-hole golf course, tennis facilities, a pool and a clubhouse with wonderful dining. You would think that most people living in the community would partake of some or all of these activities especially given the proximity and the quality. However, several years ago our board discovered that the vast majority of the owners living in the community did not belong to the Club.
Not surprisingly, many private clubs, especially golf clubs, are suffering these days. Older equity members are dying or leaving the area. It has become much harder to entice new people to buy into an equity membership to support the private nature of these clubs. Some previously private clubs have gone public in order to stay alive and in some instances clubs have gone bankrupt and the golf course property was sold off to developers.
What do many clubs do in these circumstances. They look first to the people living in the community for support. It makes sense as there is a symbiotic relationship between a thriving club and the neighborhood surrounding it. In my own community, the membership decided to amend our governing documents to require a minimum social club membership to support our Club. Such a membership is less than $500.00 per year and the hope was that once owners got a taste of the Club they would consider becoming even more involved as either golf or tennis members but the ultimate decision would be left up to them.
Other communities have taken things a step further and amended their documents to require mandatory golf club memberships, some costing as much as $25,000 and up for buy-in. The question at that point is does such an amendment change the overall scheme of the community and does it constitute an unreasonable restraint on alienation. At least three trial court decisions have held that such amendments are improper and those cases are being appealed.
How far should a community go to support the private club nestled within its walls?
Thursday, March 25, 2010
This answer depends on the type of community you have, the requirements in your governing documents and any history of crime you may have experienced in your association. Some governing documents do require the board to provide specific security measures such as roving patrols. Others are silent on the issue but the board’s duty to protect the health and safety of the community residents is implicit.
Of course no matter what level of security your documents require or you have traditionally provided, any type of criminal incident in your community necessitates an examination of current security and a discussion on what else needs to be done to prevent another incident from occurring. A violent crime against a person in the association parking lot might require upgrades in lighting the premises, trimming or removing shrubbery where people can hide and the institution of roving patrols during certain hours. An incident of vandalism might require strategically placed video cameras to capture any future incidents on film. Having a visitor’s log at a front gate so every vehicle is identified and that list can later be given to the police has also proved useful for many communities.
Not examining security measures after a criminal incident and upgrading as needed could certainly result in the association being held liable for negligence in the event a future crime occurs on common areas.
I am always concerned that a manned guard gate might give a false sense of security to residents living in those gated communities. In my own community, for example, our security guards are really controlling ingress and egress and not much else. We have a wall but certainly anyone with nothing more than a step stool anyone could hop over it. Communities are well advised to encourage residents to take their own steps (in addition to measures provided by the association) to protect themselves and their property. These measures should include locking their vehicles and homes each night, trimming shrubbery in front of their homes and units, alarming their property and generally being aware of their surroundings.
Staying safe should be a partnership between the board and the owners with security being examined at least once a year if no incidents have occurred to see what new technology and measures should be considered
Wednesday, March 24, 2010
Some of the more carefully thought out websites even have community events listings, community classifieds, community forums, community FAQ’s and neighborhood links. Of course, these sites can take time and money to create and there are monthly hosting fees as well. Associations who have functioning sites advise that they wouldn’t do without them for anything but they do ask if they can offset those monthly costs by allowing others to advertise on the sites.
There is nothing in the common interest ownership statutes that would prohibit advertising on association websites. Similarly, it is hard to imagine many, if any, association governing documents containing such a prohibition. As a result, boards should just use some common sense when it comes to allowing advertising on their association websites and other community forums.
Often it is people living in the community (realtors, plumbers, etc.) who will have the most interest in advertising on your website. There is nothing inherently wrong with allowing members to advertise on the site as long as you vet them the same way you would any other vendor or company wishing to advertise. A starting point is to contact the Department of Business & Professional Regulation (DBPR) as well as the Better Business Bureau to find out whether or not a complaint has ever been filed against the person or entity. You can also ask for referrals and contact those referrals for more information about their performance.
Once you have determined that there are no impediments to allowing the potential advertiser on your site, you should speak with your association attorney to draft some disclaimer language you can put on the site advising your members and visitors to the site that the association makes no endorsement or guarantee of any product or service advertised. While past performance is usually a pretty good indicator of future performance, there is still no guarantee that one of your members won’t obtain a lousy result from someone they contacted off your site; thus the need for a disclaimer.
Allowing advertising on your association website is a real opportunity to offset the costs of creating and hosting a website for your members. You should, however, take the proper steps outlined above if you are considering this route. In addition, if your association does decide to allow advertisers on to your site, please check with your association accountant to be sure you are not generating revenue beyond what is allowed for not-for-profit corporations.
Monday, March 22, 2010
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Last year the Florida Legislature passed SB 2080 which amended Section 373.185 of the Florida Statutes to encourage Floridians to plant “Florida Friendly” landscaping. Part of these changes impact homeowners’ associations and specifically any architectural control provisions regarding approved landscaping for the community.
Homeowners’ association covenants, restrictions, and ordinances may not prohibit Florida-Friendly Landscaping practices.
These changes do not invalidate HOA architectural control committees or landscaping committees but they do apply reasonable limits to those committees that did not previously exist.
The new law prohibits HOA landscaping restrictions that require:
• water-wasting practices such as overwatering of plants or inappropriate site design
• inappropriate placement of plants that require regular irrigation to keep the plants healthy
• excessive or improper fertilization
• excessive use of pesticides
• violation of South Florida Water Management District water use restrictions
The law now also forbids HOA prohibitions on:
-the reasonable and appropriate use of mulch
-plants attractive to wildlife such as butterfly or hummingbird gardens or other non-nuisance wildlife
-attractive, well suited plants in the landscape in favor of other plants that are less well suited to -the site (wrong plant, wrong place)
-swales or rain gardens, waterfront buffers or other protective practices
composting bins or rain barrels, etc.
This does not mean that your HOA cannot impose reasonable limits on Florida-friendly landscaping such as requirements that the landscaping be well maintained or be situated on a particular portion of the lot such as a backyard, side area or screened area where appropriate. It does mean that your HOA cannot deny landscaping plans that meet the definition of xeriscaping under this Statute. Please speak with your association attorney if you are presented with a landscaping plan from an owner and you are not sure if it falls within the protected category of Florida Friendly landscaping.
Model Florida-Friendly Covenants are included in the “Florida Friendly Guidance Models for Ordinances, Covenants, and Restrictions” publication available from the Department of Environmental Protection at http://www.dep.state.fl.us/water/nonpoint/pubs.htm.
Thursday, March 18, 2010
This begs the question that if the Association has already fought a long battle to acquire title to a unit or home, why spend additional money on attorney’s fees and costs to head back into to court to force a bank to take title? The Association has already gone through the foreclosure process, which resulted in the acquisition of title. At that point, the Association is usually better off trying to recoup the costs of the foreclosure and past due assessments by renting out the property. It is no surprise that banks today are in no rush to foreclose on delinquent owners, so renting out the property presents an opportunity to bring the account current and perhaps, after time, even make a profit. Rest assured that the bank will eventually get around to taking title back to the property but in the interim, the association can control it and rent it out.
In certain circumstances, renting out the property may not be feasible given the property’s condition; one must still keep in mind that attempting a reverse foreclosure is not a guarantee that a judge will actually grant this order. While a judge in Miami-Dade has recently approved such a measure, other judges may not and, in addition, to the past due assessments that are still owed on the property, the association may wind up owing attorney’s fees and costs on an unsuccessful Reverse Foreclosure motion.
A reverse foreclosure attempts to provide a solution when a simpler avenue might be available to hasten the bank’s acquisition of title. If there is a pending lender foreclosure that has been drawn out, the Association, as a Defendant, may attempt to hasten the bank’s acquisition of title by filing a Notice of Trial, which will force the case to judgment, and often leads to the mortgage holder taking title. This can be done during the lender’s foreclosure and does not require the association taking title itself via foreclosure.
The moral of the Reverse Foreclosure story? Every potential avenue for relief for struggling associations should be discussed thoroughly with your association’s attorney but bear in mind that some of what is being written bears little practical benefit for most associations but makes for a good story!!
Wednesday, March 17, 2010
Condominium associations must prepare and complete, or contract to prepare and complete a financial report for the preceding fiscal year within 90 days after the end of each fiscal year or such other date set forth in the bylaws. Within 21 days after completion of the financial report but not later than 120 days after the end of the fiscal year, condominium associations must provide each member with a copy of such financial report or written notice that such report is available at no charge upon request.
Cooperative associations must, within 60 days following the end of the fiscal or calendar year or annually on the date provided in the bylaws, mail or hand deliver to all owners a complete financial report of actual receipts and expenditures for the previous 12 months or a complete set of financial statements for the preceding fiscal year prepared in accordance with generally accepted accounting principles (GAAP) unless such requirement is waived by a majority of the voting interests present at a duly noticed meeting of the association.
Homeowners’ associations must prepare and complete, or contract to prepare and complete a financial report for the preceding fiscal year within 90 days after the end of each fiscal year or such other date set forth in the bylaws. Within 21 days after completion of the financial report but not later than 120 days after the end of the fiscal year, HOA’s must provide each member with a copy of the financial report or written notice that such report is available at no charge upon request.
There is a reason why the Legislature wants to make sure that members have absolute knowledge of when they will receive financial information about their community. It is their money after all; board members and officers are merely its shepherds.
Tuesday, March 16, 2010
In an HOA, the budget MAY include reserve accounts for capital expenditures and deferred maintenance for which the association is responsible. However, the association is not required to include reserve amounts in its budget unless such reserves were established by the developer OR approved by the association members.
Amounts for reserve items must be computed using a formula which is based on the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item.
Reserve funds and any interest accruing thereon MUST remain in the reserve account or accounts and MUST be used only for authorized reserve purposes unless their use for any other purpose is approved in advance by a majority of owners (for condos and HOA’s) and by 3/4 of owners (for a cooperative association) at a duly called meeting of the membership.
The members of an association may partially or fully waive funding of reserves by a majority vote at a duly called meeting of the association. However, a vote to waive reserves is only effective for the fiscal year proposed and a new vote must be conducted each year that the membership wishes to waive reserves. In a condominium association, proxies and ballots related to waiving reserves (partially or fully) must contain bold disclaimer language cautioning owners that they may be subject to a special assessment as a result of such waiver.
In an HOA, once an association provides for reserve accounts in the budget, the association must thereafter maintain and waive reserves in the same fashion required for condominium associations.
Most years there is a legislative attempt to remove the ability to waive reserves in common interest ownership communities which has been resisted vehemently by associations who wish to decide for themselves whether or not they wish to save for a rainy day. Personally, I am a saver so I am a fan of reserves but I also appreciate the countervailing argument given by many that they would rather spend funds at the absolute moment they are needed and not a minute before.
Monday, March 15, 2010
Each entry included in the association’s budget is referred to as a line item. Examples of items generally addressed in the budget include costs relating to the following:
• Administration and operation of the association;
• Management fees;
• Maintenance of association property;
• Rent for recreational and other commonly used facilities;
• Taxes upon association property;
• Taxes upon leased areas;
• Insurance premiums;
• Security provisions;
• Other expenses (accounting, legal, bulk cable, etc.);
• Operating capital;
• Fees payable to the Division
The association’s annual budget should be a good faith estimate of how much the association will take in and spend during its operation over the course of the association’s fiscal year. This includes a good faith estimate of each owner’s maintenance assessments due to the association. In today’s economic climate, the association’s operating budget should contain a line item estimating the dollar amount of delinquent assessments that it may experience during the budget year. This entry is generally referred to as anticipated bad debt. To estimate this amount, the association may review the present percentage of delinquent accounts, round upward or downward depending upon the future economic forecast and then multiply the resulting percentage by the total annual budget amount. If your association does not include a line item for bad debt in your budget, you may not have enough money to pay your bills without levying a special assessment.
This week we will also be discussing reserves and financial reporting requirements so stay tuned.
Wednesday, March 10, 2010
As a result of these statistics, many private residential communities question whether or not a defibrillator would be a wise purchase. Florida was the first state to enact legislation in April, 1997, to encourage the placement of AED’s in public places. As of 2001, all 50 states had enacted similar legislation. There is no requirement that a private community association purchase or maintain a cardiac defibrillator. However, if you do purchase one, please speak with your association counsel about the protocol you must follow for proper maintenance and use of such device, including: training potential users, testing the device regularly according to manufacturer specifications, ensuring that all members know where the device is stored, etc.
The biggest worry most people have when confronted with potential use of an AED is whether or not there will be liability for the improper or unsuccessful use of the device. Florida does have a “Good Samaritan” exemption from liability for persons who render emergency treatment with the device. Chapter 768 of the Florida Statutes is known as the Good Samaritan Act and it insulates any person, including those licensed to practice medicine, who gratuitously and in good faith renders emergency care or treatment without objection of the injured victim or victims thereof, from liability for any civil damages as a result of such care or treatment or as a result of any act or failure to act in providing or arranging further medical treatment where the person acts as an ordinary, reasonably prudent person would have acted under the same or similar circumstances.
This does not mean you can pick up the defibrillator device and use it as a weapon to hit someone over the head and expect to be protected from liability!
The decision to purchase and maintain an AED is unique to each community depending on its membership’s needs and the board’s willingness to explore these devices as a potential lifesaving device to be used should an emergency occur.
Tuesday, March 09, 2010
Recently, Collier County, Broward County and the City of Naples have all passed resolutions in support of HB 561 (sponsored by Rep. Ellyn Bogdanoff) which would exempt buildings with fewer than 3 stories from having to retrofit with hard-wired fire alarms in units and would allow members living in high-rises (buildings defined as 75 ft. or higher) to determine for themselves by a vote of 75% or higher whether or not they wish to retrofit their buildings with fire sprinklers.
Up next for similar votes: Palm Beach County, Miami Beach (meeting on March 10th) as well as Miramar and Pembroke Pines! The question could very soon become not which cities and counties have passed similar resolutions of support but which have not. In the face of so many pleas for help, can Governor Crist resist and continue to veto bills that our Florida legislators pass unanimously? Unfortunately, in the State of Florida we do not have a line item veto so if the Governor does not like any portion of a large bill, the entire bill is at risk.
Once bills are sent over to the Governor (usually some time in June), he has 15 days from the time a bill reaches his desk to sign it, veto it or allow it to become law without his signature. The fact that Representative Bogdanoff is not removing this language from her bill as well as the local elected officials now backing up her decision, only reinforces the importance of the mission at hand. While it is politically expedient to paint this issue as one of life and property safety alone, at some point, we might have to ask the Governor whether sleeping under an overpass (after having lost one’s unit to foreclosure as a result of a retrofit special assessment) is safer than sleeping inside an unsprinklered unit in a concrete block construction building that has been in existence for decades without incident.
Friday, March 05, 2010
Nowhere is this vicious cycle more pronounced than in the State of Florida. More liquidity in the lending industry will help ease this cycle. Towards that end, Fannie Mae is implementing a new “Special Approval” designation for established condominiums in Florida which will allow lenders to deliver loans to individual owners in these communities.
Why should your community take the steps to go through this Special Approval process NOW? Making your community more appealing to lenders and potential purchasers will certainly help get healthy new owners in to alleviate the current burden being carried by owners paying for those who aren’t.
In order for Fannie Mae to begin the review process for your community, they will need the following:
•A copy of the most recent budget
•A copy of the most recent financial statements
•A copy of the association’s certificate of master insurance (and flood if applicable)
•A completed Condo Questionnaire (available on their website).
Once Fannie Mae has completed its initial research, it may require additional documentation and a site inspection. However, there are ZERO costs involved with this Special Approval Designation. For more information, please email email@example.com or call 202-752-2916. To view a list of Florida condominium communities that have already received Special Approval Designation, please visit http://www.efanniemae.com/. This list is updated weekly as new communities obtain this designation. Once your community obtains Special Approval Designation, you will have that special classification for 9 to 18 months!
This is one more step you can take to be proactive in the health of your community.
Wednesday, March 03, 2010
Some associations have pamphlets filled with rules covering every aspect of association life that can be considered and others have none. While we can dispute whether or not a rule is really needed requiring lint removal from the common area dryer screens, there are four rules that every Florida association should have on their books and records.
1. There should be a rule on the association books identifying the location where all association notices will be posted. It doesn’t matter whether that location is a well-placed tree on the common areas or a bulletin board near the elevators, members need to know where the official notice location can be found.
2. There should be a rule on the association’s books regarding hurricane shutters. Section 718.113 of the Condominium Act provides that each board shall adopt hurricane shutter specifications for each building within each condominium operated by the association which shall include color, style, and other factors deemed relevant by the board. All specifications adopted by the board shall comply with the applicable building code. Owners must be allowed to install shutters subject to reasonable board rules. Don’t make the mistake of waiting until someone approaches you with a shutter request to start thinking about the style and color that best suits your community’s needs. Your hurricane shutter rule should contemplate installation requirements and removal criteria once a storm has passed.
3. There should be a rule on the association’s books regarding owner participation at meetings. Condominium owners are permitted to speak on every agenda item at board meetings. HOA owners are permitted to speak on agenda items which they petitioned to put ont he board agenda. Owner participation is subject in both condominiums and HOA’s to reasonable board rules. Those rules can include length of time that an owner is permitted to speak, rules regarding location of any audio or video equipment, requiring written submission of quesitons, etc. Don’t make the mistake of waiting until a disgruntled owner is holding your meeting hostage with an extended rant to start thinking about reasonable rules regarding owner participation.
4. There should be a rule on the association’s books regarding owner inspection of books and records. Owners in all types of common interest ownership communities are entitled to inspect their association’s books and records and there are penalties for an association’s failure to timely produce such records. Once again, such inspection is subject to reasonable board rules and regulations. It is reasonable to limit the number of requests the same owner makes in any specific time period. It is also reasonable to require a log to be maintained for owner requests, require a witness to be present to ensure documents are not removed, destroyed or altered and to limit the number of documents requested at any particular setting. Don’t make the mistake of waiting until an owner requests every financial record from the association’s inception in 1967 to present to start thinking about reasonable inspection rules.
Please speak with your association counsel about what rules make sense for your community. No matter what you decide, these four need to be on your books!
Monday, March 01, 2010
Two of the most common of these neglected provisions are the requirement for voting certificates and the requirement for an Insurance Trustee.
Voting Certificates are forms that are submitted to the association’s Secretary for units or homes owned by more than one person or owned by a corporation, partnership or other entity. These forms designate the person authorized to vote on behalf of the unit or lot if the association’s governing documents require the use of voting certificates. Usually, but not always, there is an exemption from the voting certificate requirement for units or homes owned by a husband and wife. Not all association governing documents require the use of voting certificates, but those that do contain this requirement carry certain risks should voting certificates not be properly used.
Elections can be challenged based on the improper use of voting certificates or the failure to use them at all. In addition, recall efforts are often impacted by the issue of voting certificates. A board facing a recall effort might seize on the voting certificate requirement in the association’s documents and challenge the recall petition despite the fact that other votes from the same owner or owners had been routinely accepted in the past. Not surprisingly, the failure to properly enforce voting certificate requirements over the years removes a board’s opportunity at a later time to challenge a recall petition for the failure to use voting certificates.
One other provision in some associations’ governing documents which is routinely overlooked is the requirement to use an Insurance Trustee. Many governing documents require that any insurance proceeds received by the association be deposited with and subject to the safekeeping of an Insurance Trustee. Most likely the reasoning behind such a requirement was to provide an added layer of oversight to prevent any mishandling or misappropriation of insurance proceeds.
Most governing documents define an Insurance Trustee as an institutional lender. Of course, banks charge a fee to perform this service and many associations and their members see this as an unnecessary, costly and duplicative service. Again, many associations with this requirement in their governing documents do not follow it and instead, insurance proceeds are handled and disbursed directly by the board, in violation of the documents.
If your association has either of these requirements in your governing documents, ignoring them is not a viable option. Please speak with your association counsel about amending these provisions to better suit your needs and current practices or to become acquainted with the new procedures that must be adopted in order to comply.