Wasserstein, P.A. – 2017 Legislative Update

561-288-3999

danw@wassersteinpa.com

2017 LEGISLATIVE UPDATE

This shall serve as Wasserstein, P.A.’s newsletter to our clients regarding recent legislative changes of which you should be aware.  Please note that the following is only a summary of the key changes and updates that went into effect July 1, 2017 (along with some color commentary):

CONDOMINIUMS, COOPERATIVES and HOMEOWNERS ASSOCIATIONS:

Estoppel Letters: The time that a preparer has to issue an estoppel letter is now 10 business days (reduced from 15 calendar days) and the fee may not be charged if the estoppel letter is not timely provided.  The estoppel letter fee charged by the preparer must be established either by board resolution or by contract, and the fee that a preparer may charge is now statutorily capped at $250, with an additional $100 that can be added if a rush 3 business day turnaround is requested, and another $150 that can be added if the account is delinquent.  If a requesting party is seeking estoppel letters for more than one property in the same association, then there are further fee caps associated with that type of request.  All statutory fees will be adjusted for inflation every 5 years.  If an estoppel letter is requested in conjunction with a closing that ultimately does not occur, the requesting party shall be entitled to a refund of the estoppel fee so long as they request the refund in writing and do so within 30 days of the failed closing date.  The refunded fee then becomes an unpaid assessment owed by the owner of the property.  The estoppel letter that is ultimately provided must be drafted such that its content is valid for 30 days (if sent electronically to the requesting party) or 35 days (if sent by regular mail).  The estoppel letter must now contain not only a breakdown of the debt owed, but it must also include “other information” such as:

  • the existence of a capital contribution, resale fee, transfer fee or other fee due;
  • the existence of any violations associated with the property;
  • the association’s right to approve or disapprove of a transfer of the property;
  • the existence of a right of first refusal;
  • contact info for other associations of which the property is a member (sub-associations, master, recreational); and
  • the contact info for all insurance maintained by the association.

The association must designate on its website a person or entity who is authorized to receive and process estoppel requests.

NOTE: The title agents and realtors had been lobbying for years for this legislation and 2017 was the year it finally passed.  The legislature added significant content to the estoppel letters, and therefore, increased liability and exposure for preparers while simultaneously reducing turnaround time and capping fees.  Ugh! 

NOTE: Going forward please note that for estoppel letters requested in connection with our firm clients, we will be charging requesting parties the dollar amounts indicated by these new statutory provisions.

CONDOMINIUM ASSOCIATIONS:

Fire Sprinklers and Engineer Life Safety Systems: This is the one section of this legislative update concerning legislation that was not passed.  House Bill 653, which was vetoed by Governor Rick Scott, would have pushed back deadlines for retrofitting high rise residential condominiums with either fire sprinklers or an engineered life safety system (“ELSS”) from 2019 to 2022 and would have also allowed high rise condominiums to opt out of having to install an engineered life safety system.  The reason this bill was important for high rise condominiums is that many voted last year to opt out of retrofitting their building(s) with fire sprinklers.  However, in the absence of a fire sprinkler retrofit, high rise condominiums are required to alternatively install an ELSS, which could be just as costly, if not more costly than fire sprinklers.  Since this legislation was vetoed, high rise residential condominiums cannot opt out of installing an ELSS and will instead need to focus on having their work completed by end of 2019.

NOTE: Governor Scott justified vetoing this bill based upon the recent fire at Grenfell Towner in London that killed dozens of people, along with a general goal of promoting and protecting life safety.  While this reasoning is both admirable and understandable, the vetoing of this bill is going to result in sizable special assessments for high rise condominiums, which in turn will mean some unit owners, especially those on fixed incomes, will no longer be able to afford their home. 

NOTE: If you manage or reside in a high rise condominium, please do note that per the current fire code, high rise residential condominiums are not required to retrofit the building(s) with fire sprinklers or an ELSS if all units have exits to an outdoor corridor.  However, the fire code is always changing, as are local requirements, which may be more stringent, and if your condominium is a high rise it is HIGHLY recommended that you speak to your local/county fire marshal and/or a fire safety engineer to determine your condominium’s obligations.

 

Criminal Penalties:  Forgery of a ballot envelope or voting certificate, theft or embezzlement of funds, and the destruction or refusing to allow inspection or copying of official records (in the furtherance of any crime) are now punishable as crimes.  If charged with such a crime, a board member must be removed from office and the vacancy filled.  If the charges are resolved without a finding of guilt, the board member must be reinstated for the remainder of their term, if any.  Also, any officer, director or manager accepting “kickbacks” could face criminal penalties.

NOTE: It was already challenging enough to find volunteers willing to serve on condominium boards and then this legislation gets passed.  Let’s take a thankless, unpaid position and make it even less appealing by adding potential criminal liability!  Hooray! I can tell you that these penalties were advocated against due to the potential chilling impact they may have on the pool of willing volunteers, but nonetheless, a few horror stories, primarily out of Miami-Dade County, drove the legislation to pass.  Board members beware!

NOTE: Managers and board members will want to consult with their association’s insurance agent to make sure that their directors and officers/errors and omissions coverage provides a defense not only for civil matters, but also for criminal charges that could be brought under these new statutory provisions.

 

Conflict of Interest (Attorney):  An association cannot hire an attorney who represents the association’s management company.  

NOTE: This is going to create unintended consequences as often times the management contract requires the association to indemnify and therefore, defend, the management company and property manager in lawsuits brought against them while working for the association.  This legislation would seem to require that the same attorney could not represent both the association and the management company/manager in such actions.

 

Conflict of Interest (Service Providers):  An association may not employ or contract with any service provider that is owned, or operated by a board member or with any person who has a financial relationship with a board member or officer or relative with the third degree of blood or marriage of a board member or officer.  This does not apply if the officer, director or relative owns less than 1% of the company.

 

Conflict of Interest (Directors):  Directors, officers, and their relatives must disclose conflicts of interest.  There is a rebuttable presumption that a conflict exists if a director, officer, or relative within the third degree of blood or marriage either enters into a contract with the association or holds an interest in company that conducts business with the association.

 

Purchase of Units:  A board member, manager or management company cannot purchase a unit at the association’s lien foreclosure sale or accept a deed in lieu of foreclosure resulting from unpaid assessments (except in a timeshare condominium).

NOTE: Unfortunately, this was a well-intentioned but poorly executed provision of the legislation. It has a loophole the size of Lake Okeechobee as any individual (or company) who is now personally precluded from purchasing a unit in foreclosure can still very easily execute the purchase of the unit either in the name of a limited liability company or through a “strawman” who would only hold title temporarily and then deed it over to the individual.  A for effort.  F for effectiveness.  Try again next year legislature!

 

Management:  A party providing maintenance or management services to a residential condominium may not purchase a unit at the association’s lien foreclosure sale.   If the maintenance or management company owns 50% or more of the units in a condominium, then a majority of the other unit owners can vote to cancel the contract.

 

Official Records (Bids):  Bids for materials, equipment or services are to be kept as official records for 7 years.

 

Official Records (Access by Renters):  A renter of a unit now has the right to inspect and copy the association’s bylaws and rules.

NOTE: The legislature missed the mark here almost entirely.  The intention was obviously to allow renters to see exactly what restrictions they would be subject to as residents in the condominium and as most everyone (except the drafters of this legislation) knows, the key document in this regard is the declaration of condominium.  I don’t believe that renters will care to look at the bylaws to see what constitutes a quorum for a membership meeting or how much notice needs to be given to have a special board meeting.  Naturally, they would want to look at the declaration to see if they are allowed to have pets, if the association can tow improperly parked vehicles, the nuisance provisions, and the other use and occupancy covenants that may actually have an impact on their tenancy.

 

Financial Reporting:  An association that operates fewer than 50 units must prepare a financial statement based on its total annual revenues and not just a report of cash receipts and expenditures.

 

Financial Reporting:  An association shall provide an annual report to the Department of Business and Professional Regulation (the “DBPR”) containing the names of the financial institutions with which it maintains accounts and a copy of such report may be obtained from the DBPR upon written request of any association member.

 

Debit Cards:  An association and its officers, directors, employees and agents may not use a debit card issued in the name of the association or billed directly to the association, for the payment of any association expense.  Use of such a card for purposes other than legitimate association expenses may be deemed credit card fraud.

NOTE:  The statute is silent on credit cards so for those associations that previously used a debit card for certain purchases, a credit card may be a viable way to go.

NOTE:  As with the enactment of criminal penalties, it seems like this is another piece of this year’s legislation driven by a few bad apples.  Even so, what is the message being sent here?  That it’s not ok to use a debit card because it allows an authorized individual to spend money the association actually has in its bank account, but it’s perfectly fine for that same person to use a credit card and potentially incur charges for which the association may not have the funds to repay?  Once again, a well-intentioned but poorly executed provision.

 

Website:  By July 1, 2018, an association with 150 or more units must post digital copies of certain official records on its website (except in a timeshare condominium).  The website must contain a section accessible only to unit owners and the association must provide a username and password upon request.  Notices of unit owner meetings must also be posted on the first page.

NOTE: Hooray for forced technology!

 

Term Limits:  A board member may not serve more than four consecutive 2 year terms unless approved of by 2/3 of the total voting interests or unless there are not enough eligible candidates to fill the vacancies.

NOTE: From the plain reading of this provision, it would seemingly not apply to board members serving 1 year terms so a board member who has served for 20 consecutive 1 year terms would be eligible to continue to serve in perpetuity whereas a board member serving 4 consecutive 2 year terms is limited.  Also, there is uncertainty as to whether this legislation applies retroactively to prior service accrued before July 1, 2017 or if this is a going forward restriction that won’t need to be addressed until 8 years from now.  Additionally, there is the argument that at the end of the 8th year (or really at any other time during their tenure) a board member could resign (and possibly even be re-appointed) and then contend that they did not serve 4 consecutive 2 year terms in full, thereby making them eligible to continue to serve.  Finally, there is a question as to how the 2/3 voting exception would work.  Would it have to be voted on before the election materials are sent out?  Is it voted on by proxy or in person at a meeting of the membership, or by written consent, or is the individual permitted to appear on the ballot and if 2/3 of the owners cast votes for the individual then they can serve?  Does the individual have to fund the voting effort to allow them to continue to serve or does the association pay for the mailings and other costs?  Lots of questions that are sure to result in further disputes.  Just what you wanted to hear, right?

 

Recalls:  The board is still required to hold a meeting within 5 business days after receipt of a recall but is longer required to certify or not certify the recall.

NOTE: There are differing interpretations on what this change means.  Some practitioners believe that the board is still permitted to file a recall arbitration petition with the DBPR when challenging a recall, some believe that the burden to file a recall arbitration petition with the DBPR falls on the owners voting for the recall, and others contend that the recall is automatically deemed effective and that the board members who were recalled would have to fund a recall arbitration petition with the DBPR themselves.  Once again, lots of uncertainty over procedure that is sure to result in disputes.  Fantastic.

 

Suspension of Voting Rights:  Voting rights can now only be suspended if the unit owner owes the association more than $1,000 and the debt is unpaid for more than 90 days.   Proof of the debt must be provided to the unit owner at least 30 days before the suspension can take effect.

NOTE: The statute allows for suspension of both voting rights and amenity access for delinquencies over 90 days past due.  Interestingly, the legislature decided to only add these new requirements with regard to suspension of voting rights and not with regard to suspension of amenity access.  Apparently, the legislature views an owner’s right to vote as more important to protect than their right to use the swimming pool, exercise facility or other amenities.  While voting is definitely an important aspect of condominium living, in my experience unit owners are usually more concerned with losing their amenity access.

 

Receivers:   A receiver may not exercise voting rights of any unit that is placed in receivership for the benefit of the association.

 

Ombudsman:  The ombudsman has the express power to review secret ballots cast in a vote of the association.

 

Arbitration:   Arbitrators must be attorneys licensed for at least 5 years and have mediated at least 10 disputes involving condominiums within the past 3 years, mediated at least 30 disputes of any nature in the last 3 years, or they must be board certified in real estate or condominium law.  Arbitration certification is valid for 1 year.  An arbitrator must conduct a hearing within 30 days of being assigned a case and arbitration decisions must be rendered within 30 days of the hearing.  Failure to render the decision in 30 days can result in loss of certification.

NOTE: Wow, I actually like this one!

 

Termination:  A termination must now be approved by the DBPR after it is approved by at least 80% of the unit owners.   The DBPR must approve the plan of termination within 45 days of filing.  The minimum percentage of owners needed to defeat a termination is now 5% (reduced from 10%).  The ability to vote to terminate again after a failed vote is now 24 months (increased from 18 months).  Any owner of homestead property objecting to a successful termination must now receive at least his or her purchase price regardless of party from whom the unit was purchased.  The definition of “bulk owner” for which special disclosures are required is reduced to those owning 25 percent of the units (reduced from 50 percent of the units) thereby increasing the pool of parties needing to make such disclosures.

NOTE: Don’t terminate your condominium!  What else am I going to do with my time?

 

COOPERATIVES:

Financial Reporting:  The prohibition against waiving the financial reporting requirement for more than three years in a row has been eliminated and exception that cooperatives with fewer than 50 units are exempt from preparing a compilation, review or audit, regardless of revenues, has been removed.

 

HOMEOWNERS ASSOCIATIONS:

Financial Reporting:  The exception that associations with fewer than 50 lots are exempt from preparing a compilation, review or audit, regardless of revenues, has been removed.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

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Wasserstein, P.A. – 2015 Legislative Update

Wasserstein Logo CMYK

561-288-3999

danw@wassersteinpa.com

2015 LEGISLATIVE UPDATE

This shall serve as Wasserstein, P.A.’s newsletter to our clients regarding recent legislative changes of which you should be aware.  As of July 1, 2015 the most significant bill for community associations that was passed into law was HB 791.  Most changes included in HB 791 impact both condominiums and homeowners associations unless otherwise specified.  The following are the key changes and updates:

CONDOMINIUMS AND HOMEOWNERS ASSOCIATIONS:

Electronic Voting: One of the most significant changes passed this session is that associations may now conduct elections and other membership votes via an electronic (internet-based) system. The new law includes requirements necessary to establish an electronic voting method, including a board resolution adopting this manner of voting.  An owner’s consent to online voting is required, but if the owner does not consent then he or she is still entitled to vote by paper ballot.

Electronic Transmission of Proxies: As the law previously existed, it did not allow for proxies to be submitted electronically (scanned, faxed, e-mailed, etc.).  The new law contains language similar to the language already found in Florida Statute 607.0722(10), which governs for-profit corporations, and is being added to Florida Statute 617.0721, which governs not-for-profit corporations, including both condominium and homeowners’ associations.  This new law will allow for owners to submit their proxies electronically, which will certainly facilitate membership voting by making it easier to participate (albeit participation by non-participation since its by proxy!).

Electronic Notice to Owners: This part of the bill removes from the statutes the requirement that electronic notices to owners must be authorized by the bylaws (this requirement generally meant an amendment of the bylaws was necessary since many were recorded back when the Internet was merely just a dream of the U.S. Army, Al Gore, Bill Gates or whomever else claims to have invented it and electronic notice was not even contemplated!). Now, as long as the owner consents in writing, the association may provide the owner with electronic notice and save some trees.

Suspension of Voting Rights and Amenities: A welcomed change and clarification adopted by this bill is that when an owner’s voting rights are suspended, they are effectively removed from the total number of voting interests in the community for purposes of calculating a quorum or obtaining approval of membership action.  Basically, they are removed from the denominator of the fraction.  So if you have a community of 100 units and need 67% to vote in favor of the proposed action, and 10 owners have had their rights suspended, you need only 67% of 90 rather than 67% of 100.  The bill also clarifies that the suspension of right to use amenities applies to owner, their tenants and guests, regardless of number of units owned by the owner.

Fines: This section of the bill clarifies that it is the Board of Directors that is responsible for levying fines and that the fining/covenant enforcement committee hearing must be impartial and limited to the purpose of approving or rejecting the fine levied by the Board.  This is a change I find to be somewhat poorly conceived as it 1) takes away significant authority from the committee and places further burden on the Board and 2) is a somewhat poorly worded amendment to existing law confounding whether the fine is to be determined by the Board and then approved or rejected by the committee after the fact, at a subsequent fining hearing, or if the hearing takes place first and then the fine is levied.

CONDOMINIUM ASSOCIATIONS ONLY:

Application of Payment/Assessments: The Condominium Act sets forth that any payments received by owners on a delinquent account are applied first to interest, then late fees, then collections costs and attorney’s fees, and lastly, the unpaid assessments. The bill amends Florida Statute 718.116(3) to reinforce that this application of payments is to be followed regardless of any purported “full accord and satisfaction” or “payment in full” language or any other restrictive endorsement that may accompany a short or partial payment tendered to the association.

The reason for this change is to overrule a 2014 appellate decision (referred to as the St. Croix case) that held that if a check was tendered for less than the total amount owed, but was accompanied by any of the “full accord and satisfaction” or “payment in full” language, the acceptance of the payment essentially settled the account for the amount accepted.  This caused associations, their managers and attorneys to have to be overly cautious when processing each and every payment to make sure they were not waiving any amounts rightfully owed and even to turn away certain payments, but now that fear has been allayed, at least as to condominiums.

What I would like to see clarified is the last part of the statutory application.  The last item to which payments are applied are unpaid assessments but the question remains, to which unpaid assessments are those payments applied, the oldest or the most recent?  It would make sense to apply payments to the oldest unpaid assessments first and that is often how they are handled in practice as it is most fair to the delinquent owner (since the older an assessment, the larger amount of interest that accrues).  However, it would be nice to have a clarification.  Just wishful thinking on the part of an association lawyer.

Official Records: Previously, the Condominium Act had a catch-all type of provision that made “all other records of the association…which are related to the operation of the association” part of the official records. The new law clarifies that those “other” records are limited to only “written” records.  Effectively, items such as audio or video recordings of meetings or security camera video footage are now no longer considered “official records” and accordingly, do not have to be made available to owners seeking to inspect the official records.  An interesting debate is whether e-mail constitutes a “written” record and if so, whether audio or video files transmitted via e-mail are then made part of the official records.

Distressed Condominium Relief Act: The bill also extended the “distressed condominium relief act” also known as the “bulk buyer law” until July 1, 2018.  It had been set to expire, or “sunset” on July 1, 2016.  This is important for investors that buy distressed condominium projects as it gives them immunity from various obligations affiliated with being a developer.

Insurance: The new law modified a provision that previously made the association responsible for certain “uninsured losses.”  This change really just fixes a glitch and clarifies that the association’s obligation to subsidize insurance shortfalls for items that may otherwise be the unit owner’s responsibility is limited to situations where the association was actually responsible to insure the damaged element.

HOMEOWNERS ASSOCIATIONS ONLY:

Homeowners Association Act: Florida Statute 720, which governs homeowners association, is now officially known as the “Homeowners Association Act.”  Neat.

Governing Documents Includes Rules and Regulations: While most everyone has always considered the rules and regulations adopted by an association to be part of their “governing documents,” that term, as used throughout the Homeowners Association Act (my first time calling the statute by its new official name…exciting stuff!) is now deemed to explicitly include the rules and regulations.

Notice of Amendments: While the Homeowners Association Act still requires the providing of notice to the membership of recording an amendment to the governing documents, failure to do so does not affect the validity of the amendment.

Eligibility for the Board of Directors: Taking a page out of the Condominium Act, the Homeowners Association Act now provides that an individual who is delinquent in the payment of any financial obligation owed to the Association as of the last day that he or she could nominate himself or herself to the board is not eligible to be a candidate and may not be listed on the ballot.  Once on the Board, a member’s delinquency leash is a bit looser (so as not to create excessive vacancies) as it is not until they become 90 days delinquent in the payment of any monetary obligation owed to the Association that they are deemed to have abandoned their seat on the Board, creating a vacancy to be filled accordingly.

OTHER BILLS AFFECTING ASSOCIATIONS:

Evicting Tenants of Properties in Foreclosure:  HB 779 is meant to replace the Protecting Tenants in Foreclosure Act of 2009.  Once a property is acquired at foreclosure, the new owner, whether a lender or third party purchaser, must provide a bona fide tenant (someone who was leasing at arm’s length, at a market rate) with only 30 days’ notice of the termination of the rental agreement before eviction can be pursued (if the tenant does not timely vacate).  This is a much shortened window of time for tenants to vacate as compared to the prior Protecting Tenants at Foreclosure Act of 2009 which provided that a bona fide tenant was allowed to stay in the property for the entire remaining term of their lease unless the new owner wanted to actually reside at the purchased property.

Termination of Condominiums: Since this is not something that commonly comes up with condominium associations, thankfully, I will only mention that the Condominium Act now provides that if a termination vote fails, another vote to terminate may not be considered for 18 months and voting interests that have been suspended are still entitled to vote on the termination. Also, a termination vote may not take place until 5 years after the recording of the declaration of condominium unless there is no objection.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

Common Contractual Conditions to Cover Community Associations

contractpic

As a community association attorney, I see many contracts come across my desk for review.  What concerns me are the number of contracts that do not.  You aren’t dealing with Vito Corleone and an irrefusable offer!  Any time a vendor is seeking to provide work or services to your community, you are the one in a position of power and it is of the utmost importance that your association insist on some basic protections.

First, you will want to make sure the vendor is licensed, that they are adequately insured, that they provide worker’s compensation coverage to their employees and that they will agree to name the association as an additional insured on their general liability policy.  These base requirements will be applicable to most all vendors providing goods and services to community associations and confirmation from the vendor should be insisted upon at the outset.

Next are the legal protections in the contract itself – indemnification and prevailing party attorney’s fees.  Simple enough to have input into any agreement, but when omitted can lead to disastrous results.  What happens if during the course of a vendor’s work they injure one of your residents or cause damage to a resident’s personal property?  You guessed it – that resident is suing the association.  Without an indemnification provision, the association will likely have to bear the burden of defending itself and potentially paying for a vendor’s mistake.  Now what happens if the vendor does not cause any injuries or property damage, but simply fails to live up to the terms of the contract?  If your contract with that vendor does not allow the prevailing party in litigation to recover its attorney’s fees from the losing party, it means that even if your association won its lawsuit against the vendor, the association would not be able to recover its attorney’s fees, which very well could exceed the underlying claim.

Finally, where appropriate, your association should insist that any guarantees or warranties on labor or materials be provided in writing along with the contract and before work begins so that the association knows exactly what the vendor or manufacturer will be providing (or more importantly, not providing).  Often, a contract will reference generally that the vendor or manufacturer will provide a warranty but does not specify the duration, limitations or conditions.  Make sure to get a copy of these documents before putting pen to paper.

Of course, to best ensure your community’s protection, it is recommended that you retain the services of a community association attorney to review all contracts.  Conveniently enough, the contact information for such an attorney can be found immediately below.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

Abandonment Issues

Empty

All that empty space and no right to use it…until now.

A year ago I wrote an article titled “Is Your Association Down with OPP?”  discussing the pros and cons of renting out empty units without first taking title.  The legislature has heeded the call and last month amended the Condominium Act to allow condo associations certain rights with regard to abandoned units, including the right to rent them out.  Here’s how it works:

After mailing or hand delivering a 2 day notice to the owner of record at their last known address, a condominium association can now enter a unit to clean it up, perform necessary maintenance or repairs, and to turn on utilities (get that A/C going to prevent mold!) if a unit is “abandoned”.   The association can then charge all costs incurred to the unit ledger and lien for the amounts (if they are unpaid) the same as an assessment.  Also, if a unit is “abandoned” a condominium association can petition the court to appoint a receiver to rent out the unit to offset costs incurred with regard to the unit and unpaid assessments.

A unit is defined as “abandoned” if:

  1. The unit is in foreclosure and no tenant appears to have resided in the unit for 4 continuous weeks without providing prior written notice to the association (i.e.-someone sending a letter stating they will be out of town for a month);

       OR

  1. When a unit is not in foreclosure, but no tenant appears to have resided in the unit for 2 consecutive months without providing prior written notice to the association and the association is unable to contact the owner or determine their whereabouts after reasonable attempts.

If your association has questions as to how best to make use of this great addition, it is recommended you contact a community association attorney.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Wi Fi Oh My!

wifi

Providing a wireless internet connection in common areas has become commonplace in recent years.  Many associations leave their network open, without a password, so that residents may freely join the network and access the internet from one of their portable devices.  However, this puts the association at risk for liability stemming from illegal downloads.  A colleague of mine recently defended an association in a matter where a non-resident accessed their unprotected internet connection and used it to illegally download certain..lets call them…copyrighted materials.  While the matter eventually settled it did certainly prove the importance of password protecting internet connections.  Of course, an authorized resident may have the password and still use the association’s internet connection to engage in illegal downloading.  In this regard it is wise to create a terms and conditions page that each user must also accept before accessing the association’s internet connection.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Knowledge is Power

knowledge-is-power

We have all heard the phrase “knowledge is power” but a recent Florida case involving a condominium association suggests that a lack of proper knowledge may prove to be even more powerful!

In the process of collecting delinquent assessments, a representative of the association’s management company is often required to attest to the process and procedures concerning their company’s handling of owner payments and account ledgers.  There are, however, instances where the current  management company may have had a predecessor at the property, or maybe even multiple predecessors, who handled the particular delinquent account at issue during their tenure.  So this naturally raises a question as to how the current management company can properly attest to the veracity of the records that predate their involvement with the association.

The answer is that the account history maintained by a prior management company has routinely been admitted as evidence under what is referred to as the “business record exception” in order to allow the association to fully substantiate the total amount due and owing.  However, in the recent case of Yang v. Sebastian Lakes the court held that it was not sufficient for the association’s current property management representative to authenticate the records of the prior company under the business records exception because the individual lacked personal knowledge of the predecessor’s practices and procedures and could not attest to the veracity of their records.  Really?

This is surprising since the court’s opinion is in direct conflict with the holding of the WAMCO case which is routinely relied upon and conversely holds that a testifying witness may indeed authenticate the records of a predecessor through the business records exception even though the witness is not aware of the predecessor company’s specific practices and procedures.

In comparing the two differing opinions, the WAMCO decision seems to makes more sense, at least from a real-world perspective.  Take for example the account history associated with a loan.  As we are all aware, ownership and servicing of a loan may change hands several times before there is either a payoff or a default.  In the case of a default, the logic under Sebastian Lakes would require the current holder of the loan to march a parade of witnesses into court so they could each testify as to how their specific company maintained the account history and recordkeeping for the loan during their period of ownership/servicing.  Then again, adding a parade to what many people already believe to be a circus may seem like a natural pairing so why not?

Even more concerning is that the Sebastian Lakes holding fails to account for the scenario where the predecessor, whether it be a bank, loan servicer or management company no longer exists.  It is, of course, impossible to obtain testimony from a representative of a non-existent entity, so under Sebastian Lakes there would seem to be no way to properly authenticate the prior records.  Great outcome!

Even though Sebastian Lakes seems to arrive at a somewhat strange conclusion it is beneficial in that it identifies a defense that has gained a degree of traction and reinforces the value of engaging your current management company to audit the records received from a prior management company for accuracy and consistency with generally accepted accounting principles, which, in turn, will allow them to more accurately testify on your behalf when necessary.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

Legislative Changes when a Board Rearranges

legislature

This legislative session was a busy one as far as condominiums and homeowners associations are concerned.  This article will focus  on new responsibilities impacting the board of directors for homeowners associations.

For new members on each and every HOA Board of Directors, including those directors who are re-elected or re-appointed, there is now a requirement that each individual provide a written certification to the Association stating that he or she has read the governing documents in full, will uphold the rules and discharge their duties faithfully.  One would think that these are assumed responsibilities that naturally go along with the position, right?  Well, for those who are disinclined to provide such a certification because they would like to obtain a more complete understanding of their role as a board member, or simply because they hate reading or certifying in writing that they will be good boys and girls there is an alternative!  Instead of signing such a certification, the new board member is allowed to provide the Association with a certificate from a DBPR-approved provider of educational services reflecting that the individual has successfully completed a board member curriculum either 1 year before or within 90 days after their election or appointment.  Either way, these certifications are additional paperwork that the Association must keep on file as an Association business record, which by the way, can now be obtained by Association members using new technology such as their smart phone, tablet, portable scanner, etc. (this ability to use electronic media applies to condominium associations as well).

Staying on the topic of board members and HOA elections, the Association is no longer mandated to accept nominations to the Board at the election meeting or to even have an election for that matter (if there are less candidates then open seats on the Board).  However, to avail itself of these changes, the Association must have a procedure in its governing documents specifically allowing for advance nomination of candidates.  If your Association’s governing documents do not have such a procedure, you may want to seek legal assistance from an attorney to amend the relevant provisions (see: shameless self-promotion).

Now that the board of directors is in place and each member is properly certified, what are some other legislative changes that they should know about?  Well, one new requirement is that every HOA is now obligated to report to the DBPR some basic information on or before November 22, 2013.  The required information includes the name of the Association, the FEIN tax id number, the mailing and physical address, the number of parcels, and the total amount of annual revenues and expenses from the annual budget.  No big deal, just make sure to get it done!

Another important change is the requirement that all HOAs have a policy of insurance or a fidelity bond to cover misappropriated funds.  The limits of the insurance policy or the amount of the bond must be equal to maximum amount of funds that will be in the hands of the Association or its management company at any given time and must cover anyone who can control or disburse Association funds.  However, unlike condominiums, HOAs are allowed to waive this requirement annually if the majority of the members present at a meeting at which this requirement will be discussed vote in favor of waiver.

Finally, both HOAs and condominium associations now have the option of publishing a directory of all unit owners to the community.  The directory includes names, parcel addresses and phone numbers.  A unit owner may only avoid inclusion of their phone number by providing a written request to the Association that their number not be disclosed.  Of course, it is advisable that the Association send out advance notice if it intends to create and distribute such a directory advising owners of the opt-out option with regard to phone numbers and giving ample time for owners to provide such.  This is a certainly a scenario where the adage that it is easier to ask for forgiveness than permission should not be applied.

While there were certainly other changes applicable to both homeowners and condominium association in this year’s legislative session, those will be discussed in future articles, or you can feel free to contact me to discuss.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999