Author: rembaumlaw

Does an unrecorded assessment lien have any validity or value whatsoever? You bet it does! In a very recent Fourth District Court of Appeal case, Calendar v. Stonebridge Gardens Section III Condominium Association, Inc., decided December 13, 2017, the plaintiff homeowner, Mrs. Calendar, appealed a trial court order that dispersed surplus funds from a condominium unit tax sale in favor of the condominium association. The plaintiff homeowner argued that the trial court erred in dispersing the surplus to the condominium association when, in fact, the condominium association had not yet recorded its assessment lien or obtained a final judgment of foreclosure. In other words, she argued the association’s lien was not perfected because it was not recorded. Thankfully, the Fourth District Court of Appeal disagreed with her.

Germaine to the appellate court’s analysis was the “relation back” language set out in section 718.116, Florida Statutes. More specifically, this legislation provides in relevant part, that,

the association has lien that is effective from and shall relate back to the recording of the original declaration of condominium… However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the condominium parcel is located.

Therefore, except as to a first mortgagee lender, the condominium association has a perfected lien that relates back to the date that the declaration of condominium was initially recorded. However, so as to encourage lenders to loan money in the form of a mortgage to a potential purchaser of a condominium unit, then, in that instance, the association’s lien is only perfected from the date the association’s lien is actually recorded in the public records. In that way, the first mortgagee will have priority over the association’s assessment lien.

In other words, and in plain English, the Fourth District Court of Appeal held that as to everyone but the first mortgagee, the condominium association, by virtue of the recordation of its declaration of condominium, has a lien which is effective from the date the declaration of condominium was initially recorded. This is extremely important in determining what is called “lien priority,” which is necessary to determine how to distribute surplus funds resulting from a tax foreclosure, amongst other things.

In deciding this case, the Fourth District Court of Appeal has made it patently clear that, except as to a first mortgagee, upon the recordation of a declaration of condominium, a condominium association has a perfected statutory lien that relates back to the date of the recording of the declaration of condominium and, therefore, a recorded claim of lien is not required to be in line for the surplus that relates to a tax sale of a condominium unit.

The really good news here is that in July 2007, the Florida legislature mirrored this statutory provision into Chapter 720, the Homeowners’ Association Act, and thus, it was made applicable to homeowners’ associations (HOA), too. Therefore, reasoning by analogy, except as to first mortgages, the HOA can also assert that its liens relate back to the recording of the HOA declaration, too. It is also possible that an HOA’s declaration recorded before July 2007 included a similar provision so it too could argue its HOA assessment liens related back to the date the HOA declaration was recorded, but this will need to be determined on a case by case basis.

This is a great result for associations!

It is the time of year when community associations across the state are electing members to serve on their board of directors. When considering whether or not you would like to put your name in the hat as a candidate for a director seat, you should consider the responsibilities you will have to take on that include the fiduciary duties owed to the members of your association.

Directors and officers owe their community’s members a duty of care and a duty of loyalty to act in the best interests of their association by acting with loyalty, honesty, and in good faith. Directors and officers owe a duty to exercise reasonable business judgment and to use ordinary care and prudence in the operation of the association. Directors and officers should perform their activities in good faith and in the best interest of the association, exercising the care an ordinary person would use under similar circumstances.

That said, directors and officers are not required to be perfect. Decisions of the board are typically protected by the “business judgment rule.” The “business judgment rule” acts to preserve and protect a board’s decision so long as the board acted in a “reasonable” manner. In general, absent actual wrongdoing in the form of fraud, self-dealing, or unjust enrichment, corporate directors and officers cannot be held personally liable for corporate acts. The protection afforded by the business judgment rule fades away when an act crosses the line from “negligence” to “gross negligence”.

For example, breaches of these fiduciary duties would occur when a director receives compensation in the form of a service or money for the privilege of doing business with the director’s association or when a director discloses to a third party privileged information intended for the board of directors only. In the event of a breach of such fiduciary duty, there is little recourse against a director or officer who has committed the breach, except to file a lawsuit, which is often a costly endeavor.

While it is clear that directors and officers owe fiduciary duties to their association’s members, can a member allege a cause of action against one or more board members arguing that they breached their fiduciary duty owed to the association? The answer to this question is unequivocally, “no”. This was made clear as recently as August 30, 2017 in a recent Fourth District Court of Appeal decision in Collado v. Baroukh, et al., 42 Fla. L. Weekly D1917 (4th DCA Fla) citing Towerhouse Condo, Inc. v. Millan 475. So.2d 674 (Fla. 1985.

In regard to directors and officers immunity from civil liability, section 617.0834, Florida Statutes, provides in relevant part, that:

(1) An officer or director of a nonprofit organization …is not personally liable for monetary damages to any person for any statement, vote, decision, or failure to take an action, regarding organizational management or policy by an officer or director, unless:

(a) The officer or director breached or failed to perform his or her duties as an officer or director; and

(b) The officer’s or director’s breach of, or failure to perform, his or her duties constitutes:

1. A violation of the criminal law, …;

2. A transaction from which the officer or director derived an improper personal benefit, directly or indirectly; or

3. Recklessness or an act or omission that was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

(2) For the purposes of this section, the term:

(a) “Recklessness” means the acting, or omission to act, in conscious disregard of a risk:

1. Known, or so obvious that it should have been known, to the officer or director; and

2. Known to the officer or director, or so obvious that it should have been known, to be so great as to make it highly probable that harm would follow from such action or omission.

In the end, it is wise for board members and officers to act reasonably under the circumstances in order to provide for better insulation against any argument that a breach of fiduciary duty occurred.

For those not yet introduced to the phrase “statutory safe harbor,” in the context of community associations, it limits the past due assessment liability of a first mortgagee, along with its successor or assignee of the mortgage to who acquires a condominium unit or a HOA parcel as a result of foreclosure of its first mortgage or by deed in lieu of foreclosure, to the lesser of one percent (1%) of the original mortgage debt or the unpaid assessments that accrued during the 12 months before the first mortgagee, its successor or assignee, obtained title. A number of cases regarding the application of the statutory safe harbor have been decided with the past few years regarding the extent and reach of statutory safe harbor, most of which have benefited the lender or its successor or assignee of the mortgage.

In today’s Roundup, we look at the liability of a subsequent owner who acquired tittle from the lender who had previously successfully foreclosed, but failed to pay the statutory safe harbor prior to transferring the title. The question of whether an owner who acquired title subsequent to the first mortgagee is entitled to the statutory safe harbor on the delinquent assessments due when the first mortgagee failed to pay the statutory safe harbor prior to their transfer of title to a new owner was addressed in the October 25, 2017 opinion of Florida’s Fourth District Court of Appeal in the case of Villas of Windmill Point II Property Owners’ Association, Inc. v. Nationstar Mortgage, LLC.

In this case, CitiMortgage held the first mortgage on a parcel, then foreclosed on the mortgage and obtained title to the parcel as a result of the foreclosure. After obtaining title to the parcel, CitiMortgage deeded the parcel to Fannie Mae. A dispute arose as to whether or not Fannie Mae was entitled to the application of the statutory safe harbor upon the delinquent assessments due to the Association prior to obtaining title. The Association argued Fannie Mae owed all of the prior assessments due and Fannie Mae argued that it was entitled to the benefits of the statutory safe harbor. This dispute resulted in a lawsuit brought by Fannie Mae’s agent, Nationstar, against the Association, seeking application of the statutory safe harbor provisions, declaratory relief, and damages.

At trial, the trial court determined that Fannie Mae was entitled to the application of the statutory safe harbor in the amount of one percent (1%) of the original mortgage debt. On the Association’s appeal of the trial court’s decision, the Association argued that Fannie Mae was not entitled to the statutory safe harbor provisions of section 720.3085(2)(c), Florida Statutes, because Fannie Mae was not a first mortgagee, or its successor or assignee, that acquired title to the parcel by foreclosure or by deed in lieu of foreclosure. However, the Appellate Court did not agree with the Association’s argument.

The Appellate Court held that, although Fannie Mae was not a first mortgagee, or its successor or assignee, that acquired title to the parcel by foreclosure or by deed in lieu of foreclosure, Fannie Mae does indirectly benefit from the statutory safe harbor provisions because Fannie Mae is jointly and severally liable with CitiMortgage, the prior owner, for all unpaid assessments due up to the time of transfer of title, pursuant to section 720.3085(2)(b),Florida Statutes, and CitiMortgage did qualify for the application of the statutory safe harbor provisions. In other words, it would appear that the Association tried to argue that because the foreclosing lender failed to pay the statutory safe harbor prior to its sale to a new owner, the new owner should be jointly and severally liable for all of the past assessments due without regard to the statutory safe harbor provisions. In effect, both the trial court and Appellate Court held that the new owner did acquire the joint and several liability of the prior owner, and since the prior owner was the foreclosing lender and since it was entitled to the statutory safe harbor and even though the lender did not pay it to the Association prior to their transfer of title to the new owner, nevertheless, the new owner was only jointly and severally liability up to the amount of the predecessor owner. Since, in this instance, the predecessor owner was entitled to the benefits of the statutory safe harbor, then so too, was new owner.

While this case was with regard to the statutory safe harbor provisions applicable to homeowners’ associations under Chapter 720, Florida Statutes, it is likely that this decision will also be applicable to condominium associations under Chapter 718, Florida Statutes, due to the substantial similarity in the statutory safe harbor provisions of each of these chapters.

Ownership of a condominium unit, includes “appurtenances”, meaning rights which are attached to the unit and pass with the unit upon its sale. A plain English definition of the term means “connected to”. Typical examples of an appurtenance include common elements to which one or more unit owners have an exclusive use right such as the limited common element balcony attached to the unit and a limited common element parking space. More specifically, section 718.106 of Chapter 718 of the Florida Statutes, more commonly referred to as the “Condominium Act”, provides that appurtenances include:

1) an undivided share in the common elements and common surplus;
2) the exclusive right to use limited common elements as designated by the declaration;
3) an exclusive easement for the use of the airspace occupied by the unit;
4) membership in the condominium association with full voting rights; and
5) other appurtenances as may be provided in the declaration of condominium.

With limited exception, and unless otherwise set out in the declaration of condominium as originally recorded, appurtenances to a unit cannot be materially altered or modified without the approval of ALL of the unit owners, meaning one hundred percent (100%) approval, is required. This requirement is set out in section 718.110(4), Florida Statutes. Commonly, the use of this level of unit owner approval is evoked when a unit owner colonizes, or takes over, a portion of the common elements for that unit owner’s exclusive use. For example, where a unit owner installs a private patio in the common elements adjacent to his/her unit or where a unit owner finishes a common element attic space for use as a spare room.

However, the use of section 718.110(4), Florida Statutes, as a sword against an amendment to the declaration of condominium removing membership in an off-site fitness club designated as an “appurtenance to the Unit” in the declaration of condominium was recently denied on October 18, 2017 by Florida’s First District Court of Appeal in the case of Silver Beach Towers Property Owners Association, Inc., Silver Beach Towers East Condominium Association, Inc., and Silver Beach Towers West Condominium Association, Inc. v. Silver Beach Investments of Destin, L.C., and The Club at Silver Shells, Inc. It is the fifth factor, as set out in section 718.106, above, “other appurtenances as may be provided in the declaration of condominium” that is the subject of the appellate court’s review.

In this case, the declaration of condominium provided that each unit owner automatically became a non-equity member of The Club at Silver Shells, Inc. (the “Club”) which membership was deemed appurtenant to the unit. Unit owners were prohibited from terminating their membership until the unit was conveyed to another owner, but the Club was authorized to terminate an owner’s membership without notice to the owners. The Club’s property and facilities were located approximately a mile away from the condominiums and remained the property of “Silver Shells Corporation.” Although the Club property was “intended primarily for the benefit of the Owners and Occupants of Units,” the Club property could also be made available to the general public. However, the unit owners remained responsible to pay dues and fees set and charged by the Club at its sole discretion.

To rid themselves of the need to pay dues and fees to the Club, the declaration of condominium was amended to remove the provisions related to the Club membership and related expenses pursuant to the typical amendment provisions as set out in the declaration requiring the affirmative approval of a super majority of the owners. This amendment was later challenged by the Club and the community’s developer as being invalid for failure of the amendment to have been approved by ALL of the unit owners in accordance with section 718.110(4), Florida Statutes. In other words, in plain English, the Club and developer argued that, because membership in the off-site fitness club was declared as an appurtenance to ownership of a condominium unit, they argued amending this provision out of the declaration of condominium required 100% affirmative consent of ALL of the owners.

The trial court agreed with the Club’s and developer’s argument. But, on appeal the Appellate Court disagreed with the trial court and found that, notwithstanding the declaration of condominium provision which deemed that the membership in the Club was appurtenant to the unit, such membership was, in fact, not an “appurtenance to the unit” as the phrase is characterized in the law. In other words, the appellate court held that merely describing something as an appurtenance in a declaration of condominium does not really mean it is an actual appurtenance if the appurtenance does not comply with then provisions of s. 718.106, Florida Statutes, discussed above.

The Appellate Court reached this conclusion because the Club memberships in the off-site commercial fitness club:

1) were “non-equity” memberships,
2) were not exclusively available to unit owners,
3) were terminable solely by the Club without cause or recourse of the member,
4) the club did not constitute a part of the “common elements” or “condominium property” as defined by sections 718.108 and 718.103(13), Florida Statutes, and
5) the Court found that the Club was not owned, controlled, or even affected by any input from the unit owners or the associations.

So, in other words, the Court said, without saying it, there was not a sufficient nexus between the requirement of club membership and condominium unit ownership because the Club memberships were not “appurtenances to the units,” as the phrase is legally defined, the approval of all of the unit owners to an amendment modifying such “appurtenances” in accordance with in section 718.110(4), Florida Statutes, did not apply. Therefore, the unit owner vote to amend the declaration of condominium by its normal amendatory provision to rid themselves of the requirement of the Club membership and dues was proper.

In the end, merely declaring something an “appurtenance” in a declaration of condominium does not necessarily make it so. If your board of directors has questions about your condominium’s appurtenances that are appurtenant to unit ownership then you will need to consult with your association’s attorney.

In today’s overly litigious world, more and more, when a community association is sued for everything from slip and falls, maintenance and repair obligations, to failure to provide official records, so too is the management company. Thus, there is no need to wonder why community association management companies require their community association clients to indemnify them for their company’s and managers’ acts of ordinary negligence. In other words, if the manager is sued by a member, guest, or even a third-party vendor, then the purpose of including the contractual duty for the association to indemnify the management company and its managers is designed to ensure that all the fees and costs of the litigation, as well as any resulting monetary damage judgment entered against the manager and/or their management company, would be paid for, in full, by the association. As you will read below, for one management company, it did not quite work out that way.

The indemnification provision set out in a management contract can be a contentious part of a management agreement negotiation, most especially between the association’s lawyer and the lawyer representing the management company. Upon legal review, some management contracts already have fair indemnification provisions as a part of their contract and need no further negotiation. Other management contract indemnification provisions require re-drafting and negotiation of their boilerplate indemnification provision. If the management company is not willing to do so, then that is something that must be seriously considered by the board. Either way, the board should fully understand the implications of the indemnity provision set out in their management contract. While contract terms requiring a community association to indemnify their management company are likely as old as some of the very first management contracts, in 2014, the Florida Statutes were amended for the first time to address management company indemnification. The 2014 creation of section 468.4334, Florida Statutes, provides that,

“a contract between a community association and a community association manager or management company may provide that the association will indemnify and hold harmless the manager and management company for ordinary negligence by the manager or management company that is the result of an instruction or at the direction of the association.”

Notwithstanding, section 468.4334, Florida Statutes, also prohibits indemnification of a manager or management company for anything which,

“violates a criminal law; derives an improper personal benefit, either directly or indirectly; is grossly negligent; or is reckless, is in bad faith, is with malicious purpose, or is in a manner exhibiting wanton and willful disregard of human rights, safety, or property.”

In plain English, when read as a whole, section 469.4334, Florida Statutes, provides that the management company contract might require association indemnification of the management company for its ordinary negligence, but prohibits any term in the contract that would require the association indemnify the management company for its intentional bad acts and seriously reckless behavior.

Because your community association management contract will most likely have an indemnification provision to one degree or another, the question arises as to when and to what degree the obligation of the association to indemnify the management company takes effect. This was a topic of discussion in a recent Third District Court of Appeal case, MVW Management, LLC v. Regalia Beach Developers, LLC, Case No. 3D16-2198.

In this case, Regalia, the developer of a condominium project, sued MVW Management, the condominium’s manager, for mismanagement of the condominium under Regalia’s management contract with MVW Management. As Regalia is a party to the management contract with MVW Management, this action is deemed a first-party action, as compared against a third-party action in which, for example, a guest or vendor sues the management company. The management contract between Regalia and MVW Management provided for indemnity of MVW Management. MVW Management made a claim under the indemnity provision of its contract for advancement of its litigation expenses.

The indemnity provisions in the management contract provided that “[e]xpenses including attorneys’ fees, court costs, judgments, fines, amounts paid in settlement and other payments incurred by [MVW Management]… shall be paid by [Regalia] in advance of the final disposition of such action, suit or proceeding.” Notwithstanding this provision, the Appellate Court agreed with the trial court’s decision and determined that MVW Management was not entitled to advancement of its litigation expenses because the provision does not apply to a first-party litigation, such as the present case.

The Appellate Court explained that the right to be indemnified and the right to advancement of litigation expenses are different:

• “indemnification” is the right to be paid at the end of the lawsuit so long as certain conditions are met.

• “advancement of litigation expenses” is like a loan in which one party pays for the litigation expenses of the party holding the right as they are incurred with the understanding that the amounts must be paid back in the event the case is lost.

Although this distinction exists, both terms were intertwined in the case at hand. The Appellate Court explained that indemnification provisions in Florida only apply to third-party claims unless the language of the indemnification “clearly and unambiguously shows an intent to extend indemnity to first-party claims.” Because the management agreement in this case did not “clearly and unambiguously shows an intent to extend indemnity to first-party claims,” MVW Management was not entitled to advancement of its litigation expenses under the indemnification provisions of its management agreement with Regalia.

During this past session of the Florida legislature, new laws in regard to condominium association director and officer conflict of interest became effective July 1, 2017. These new laws are set out sections 718.302 and 718.112(2)(p), Florida Statutes, and when read together create quite a conflict themselves. As you soon discover there is a significant distinction between a contract for services versus a contract for goods. On the one hand, one provision prohibits the association from contracting with a director, officer, their relatives, or their company for services and, on the other hand, the other provision seems to allow a contract with a director, officer, their relatives, or their company with the proper disclosure to, and the approval of, the association’s board of directors.

More specifically, section 718.112(2)(p), Florida Statutes, provides that:

“Service providers; conflicts of interest.— An association, which is not a timeshare condominium 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 a relative within the third degree of consanguinity by blood or marriage of a board member or officer. This paragraph does not apply to a service provider in which a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer, owns less than 1 percent of the equity shares.”

On the other hand, section 718.3027, Florida Statutes, provides that:

“Conflicts of interest.—

(1) Directors and officers of a board of an association that is not a timeshare condominium association, and the relatives of such directors and officers, must disclose to the board any activity that may reasonably be construed to be a conflict of interest. A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice, as required in subsection (4):

(a) A director or an officer, or a relative of a director or an officer, enters into a contract for goods or services with the association.

(b) A director or an officer, or a relative of a director or an officer, holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

(2) If a director or an officer, or a relative of a director or an officer, proposes to engage in an activity that is a conflict of interest, as described in subsection (1), the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the meeting agenda. If the board votes against the proposed activity, the director or officer, or the relative of the director or officer, must notify the board in writing of his or her intention not to pursue the proposed activity or to withdraw from office. If the board finds that an officer or a director has violated this subsection, the officer or director shall be deemed removed from office. The vacancy shall be filled according to general law.

(3) A director or an officer, or a relative of a director or an officer, who is a party to, or has an interest in, an activity that is a possible conflict of interest, as described in subsection (1), may attend the meeting at which the activity is considered by the board and is authorized to make a presentation to the board regarding the activity. After the presentation, the director or officer, or the relative of the director or officer, must leave the meeting during the discussion of, and the vote on, the activity. A director or an officer who is a party to, or has an interest in, the activity must recuse himself or herself from the vote.

(4) A contract entered into between a director or an officer, or a relative of a director or an officer, and the association, which is not a timeshare condominium association, that has not been properly disclosed as a conflict of interest or potential conflict of interest as required by s. 718.111(12)(g) is voidable and terminates upon the filing of a written notice terminating the contract with the board of directors which contains the consent of at least 20 percent of the voting interests of the association.

(5) As used in this section, the term ‘relative’ means a relative within the third degree of consanguinity by blood or marriage.”

Based upon the language as set out in section 718.3027, Florida Statutes, it appears that the condominium association may contract with a service provider where a conflict of interest exists if (i) the conflict is disclosed to the board; (ii) the proposed activity is listed on, and all contracts and transactional documents related to the proposed activity are attached to, the agenda of the board meeting at which the proposed activity is considered by the board; (iii) the interested party leaves the meeting during the discussion of, and the vote on, the activity and recuses himself/herself from the vote on the contract.

Some additional clarity is clearly needed to help navigate the situation. As related to contracts for goods section 718.3027, Florida Statutes, is applicable because no conflict is created in the statutes for these types of contracts. But there is a conflict in the statutes as to contracts for services. On the one hand, section 718.112(2)(p), Florida Statutes, provides that the association cannot engage a director, officer, or their relatives for the provision of services to the association. On the other hand, section 718.3027, Florida Statutes, tells us that the association can do so, so long as certain requirements are met. So, which statute should be followed?

Given that these statutes are new to Chapter 718, these provisions have not been analyzed by the courts. Therefore, there is no judicial guidance as to the application of these provisions. With that in mind, application of existing rules of statutory interpretation apply. As to existing contracts, there exists both United States and State of Florida Constitutional protections against government impairment in existing contracts. In addition, neither statute provides for retroactive application. Therefore, unless and until a court provides to the contrary, any contract in existence prior to the effective date of the new legislation that fails to adhere these new laws remains in full force and effect.

As to new contracts, meaning post July 1, 2017, a prudent condominium board would not enter into a new contract for services with an interested director or officer. Alternatively, the board member could resign. However, the board may also roll the dice and contract with the interested director or officer by following the requirements of section 718.3027, Florida Statutes. Only time will tell if the dice game was worthwhile.

If your condominium association is grappling with these issues, then consulting with the association’s lawyer is strongly recommended.

As we, our neighbors, families, and friends, here and in Puerto Rico, are picking up the pieces in the aftermath of Hurricane Irma and Hurricane Maria, the prospect of making claims on our homeowner’s insurance policies can seem overwhelming in the face of the destruction caused by these storms. Much of the damage in our neighborhoods are caused by strong winds, including roof and fence damage. Wind related damages are generally covered by your windstorm insurance policy. The flooding from rainwater and storm surge is excluded from both your general liability and windstorm policies likely because flooding is the most common and costly natural catastrophe.

In Florida’s four southernmost counties — Monroe, Miami-Dade, Broward, and Collier — more than 1.3 million homes lie in high-risk flood areas, according to data from the National Flood Insurance Program. Of these 1.3 million homes, more than 861,000 of them do not have flood insurance! As for those homes that are not in designated flood zones, the number of homes having flood insurance are much worse. This is cause for concern because, depending on the source, as little as 20-25% up to more than 50% of flood events occur outside of designated flood zones. Though your home and community may be in a low-risk flood zone, there is never a no-risk flood zone. Remember, even if you live inland, Florida is a peninsula surrounded on three sides by water and is at sea level. Flooding is always a risk.

The Federal Emergency Management Agency (FEMA) is the governmental organization which designates flood zones and creates flood maps for most parts of the United States. Whether or not an area is a designated flood zone depends on numerous factors, including elevation, average rainfall, and proximity to waterbodies. Flood zones are organized into three categories: high-risk, moderate-low risk, and undetermined. Although some homeowners within certain flood zones are required to obtain flood insurance in order to obtain a federally insured mortgage, most are not.

Because the purchase of flood insurance policies is often not required by the declarations of covenants of many community associations, many homeowners’ and community associations alike opt not to purchase flood insurance to lower the cost of assessments. In low-risk and moderate-risk flood zone areas, premiums can be several hundred dollars per year for homes, depending on the value of the home and the contents covered under the policy. In high-risk flood zone areas, annual premiums can reach into the thousands.

While it is reported that most Floridians do not have flood insurance coverage, Floridians actually account for a third of all of the flood insurance policies nationwide. Without flood insurance coverage, flood victims must rely on savings and other assets to finance their recovery.

FEMA also administers the National Flood Insurance Program (NFIP) which was created by the Federal government in 1968 to help control the growing cost of federal disaster relief. The NFIP offers federally secured flood insurance to community associations that adopt and enforce effective floodplain management policies to help reduce future flood losses. You can see if your community participates in the NFIP by visiting NFIP’s Community Status Book online through FEMA’s website. Is your community adequately covered in the event of a flood event? Check with your association’s insurance agent regarding flood insurance to find out more and remember this:

If you do not buy flood insurance for your home and your community association does not have flood insurance for its clubhouse and the like, then one day when you least expect it, you too, could be all wet and up the creek without so much as a paddle!

Your association is gearing up for a large project. Maybe it’s time to re-do the clubhouse or plan for that $2M dollar concrete restoration project that was put off for far too long. Other large scale projects can include painting, concrete restoration, interior restoration, deck/paver repair or replacement, and foundation repairs, and so much more.
Too often, associations rely on untrained personnel to handle these projects such as a board member or manager. Doing so, is penny wise but pound foolish. Sure, the Board feels as though they pay a manager so the manager should manage the project, too – but remember the qualifications for being a licensed community association manager have very little to do with construction project management. In fact, often times, management contracts have disclaimers that limit management company liability when the assigned manager finds themselves involved with project management.

Gary Pyott, LCAM, who was involved with association management for over 20 years, is now a principal at Association 1st LLC, a Professional Project Management/Owners Rep company and he has a lot to say about this subject. Pyott explained that in his 20 years of association management he has seen case after case where the Board’s perception of their manager or management company experience regarding project management was over estimated. Pyott says, “associations hire attorneys to do legal work, accountants to complete financial work, engineers to write specifications, why not hire professionally trained Project Managers to manage large scale projects in the interest of all of the owners especially when millions of dollars of unit owner funds are on the line.”

All too often Pyott has witnessed the situation where an association allows their manager, and in some cases a board member or committee, to oversee large scale projects which, in the end, cost the association significantly more dollars in legal fees and remediation contractor fees to complete the project correctly. Without properly trained professionals to oversee and manage projects, the chances of having vendor and material issues increases, the time for project completion is more likely to far exceed the original timeline, and project budgets can experience significant overruns which can easily lead to another special assessment. By that time, the community is up in arms over the situation.
According to Pyott, a Project Manager/Owners Rep engaged by a community association has the responsibility to protect the association, its members and the board, too. He explained that there are three phases to project management of this scale.

1) Project Planning & Pre-construction Phase:
• Discuss project, construction methods & materials, and identify expectations from all parties.
• Prioritize the budget, schedule and project specific requirements.
• Identify any items which may not be included on permit/bid but which may impact cost, (municipal approvals, specialty trades, etc.).
• Coordinate with the association’s lawyer in regard to material alteration votes and loans.
• Provide preliminary schedule of values based on drawings from design team, and coordinate as needed with all parties (design team, contractors, vendors, specialty trades, etc.).
• Prepare preliminary cost estimates for specific line items or divisions for items beyond the scope of the general contractor, if applicable.
• Prepare formal comprehensive budget including items which may be excluded from the general contractor’s estimate.
2) Construction/Project Management Phase:
• Hold weekly meetings with contractors and project team, and provide report/minutes.
• Conduct regular scheduled and unannounced site visits.
• Require and monitor GC updates and maintain project schedule on a weekly basis, and identify any lags or delays in schedule
• Track contactor’s inspection progress
• Confirm status of long lead time orders
• Review and coordinate requests for information
• Review and coordinate change orders
• Track contractor deliverables such as shop drawings, submittals, and samples for approval.
3) Project Close-Out/Transition Phase:
• Monitor progress of final inspections.
• Confirm lender close-out requirements.
• Request and track subcontractor final release of lien.
• Track and confirm receipt of contractor’s close-out book to include: All as-built drawings. All equipment manuals. Warranties. Extra materials from project. Finish samples and identification of finishes used which are not identified in ID drawings.

These three phases have a multitude of additional items under each phase that a professional in the field of Project Management/Owners Rep will coordinate and oversee on behalf of the association. Spending time to evaluate and hire a Professional Project Manager/Owners Rep initially is a core responsibility of the board and should be the very first step in large scale project planning.

If your board has any specific questions or needs regarding project management you can contact Gary Pyott at Association 1st LLC, a Professional Project Management/Owners Rep, by emailing him at gary@association1st.com or by calling him at 305-588-7658.

An interesting question that arises from time to time is whether the protections of the United States Constitution (and the Florida Constitution) apply within the gates of a community association. In most circumstances, in order to begin a constitutional analysis the very first step is whether there is any governmental action taking place. Clearly, in the context of a homeowners’ association resident publishing their own opinions on a blog, there is no governmental action. Even so, insofar as freedom of the press is concerned, the First Amendment to the United States Constitution reigns supreme, though not without certain limitations.

In a recent Fifth District Court of Appeal case, Fox v. Hamptons at Metrowest Condominium Association, Inc., the Court had the opportunity to examine this issue. It should be noted that this opinion was filed by the Court on July 21, 2017 and is still subject to revision or withdrawal. In this case, association member, Fox, appealed the trial court’s order finding him guilty of civil contempt of court for violating a settlement agreement that he entered into with the association. He argued that portions of the trial court’s contempt order constituted a prior restraint on his protected speech rights under both the Florida Constitution and the United States Constitution. In short, the Court agreed.

The background of this case is a typical scenario where Fox failed to comply with the association’s declaration and its rules and regulations which caused irreparable harm to other owners and residents within the association. The association’s complaint also alleged that Fox was engaged in a continuous course of conduct “designed and carried out for the purpose of harassing, intimidating, and threatening other residents, the Association and its representatives.” The trial court had entered a preliminary injunction and then the parties reached a settlement agreement in which Fox agreed to cease certain activities.

It did not take long for Fox to violate the terms of the settlement agreement. As a result, the association filed a motion for contempt and argued that Fox willfully and intentionally violated the terms of the settlement agreement, and thus the final judgment, too. The trial court found Fox in civil contempt and, in so doing, also ordered that Fox stop posting, circulating, and publishing any pictures or personal information about current or future residents, board members, management, employees, or personnel of the management company, vendors of the association, and any other management company of the association on any website, blog, or social media. He was further ordered to take down all such information currently on any of his websites or blogs. The trial court’s order also prohibited Fox from starting any new blogs, websites, or social media websites related to the association. If anyone reached out to Fox with inquiries regarding the association, pursuant to the court’s order, he was not allowed to post a response online. Instead, he would have to call the person to express his concerns verbally.

On appeal, Fox argued to the Court that the trial court’s punishment violated his right to speak freely. In the end, the Court agreed that the trial court’s blanket prohibition of Fox’s online speech constituted an unconstitutional prior restraint on his free speech rights. In so doing, the Court noted that “[i]t has been established that ‘[p]rior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights.’” The Court also noted that the United States Supreme Court has “consistently classified emotionally distressing or outrageous speech as protected, especially where that speech touches on matters of political, religious or public concern.” The Court then cited other cases finding that statements on an individual’s blog constituted opinion speech protected by the First Amendment.

However, the Court wisely noted that “the right to free speech and the freedom of the press are not without their limits” and, in so doing, cited to prior United States Supreme Court opinions which reminds readers of that “[f]reedom of speech does not extend to obscenity, defamation, fraud, incitement, true threats, and speech integral to criminal conduct. Speech that does not fall into these exceptions remains protected.” If the writer/publisher prints libelous, defamatory, or an injury story, the remedy does not lie with an injunction, but rather with a claim for damages or criminal action after publication.

With the aforementioned in mind, the Court determined that the trial court erred when it prohibited Fox from making any statements at all pertaining to the association on his websites, blogs, and social media. Therefore, the trial court order was reversed in part, but only in regard to the complete prohibition imposed on Fox on posting on any website, blog, or social media. However, the Court also opined trial court did not err in determining that the previously agreed-upon settlement agreement could be enforced and it affirmed the contempt order. The case was then remanded back to the trial court for determination of an order consistent with the opinions of the Court.

In a recent Rembaum’s Association Roundup article regarding Florida’s newest non-native invasion of overnight rentals through Vacation Rentals by Owner (VRBO) and AirBnB, we discussed what an association can do in order to protect its community from becoming the newest unnamed hotel/motel through the adoption of lease restrictions and lease approval requirements. Although these methods remain available to associations, one avenue of enforcement has been fully obliterated from the list of possible ways to rid the community of short-term, overnight and transient rentals as a result of a decision in a recent appellate case. In short, if your community’s governing documents prohibit commercial activity, this prohibition will NOT protect the association from VRBO and AirBnB rentals.

In Florida’s First District Court of Appeal case of Santa Monica Beach Property Owners Association, Incorporated v. Acord, the Acords owned two properties within the Santa Monica Beach community which they were renting on a short-term basis through VBRO. The association’s restrictive covenants provided that the properties can only be used for residential purposes and prohibited use of any property for business purposes. Upon learning of these transient rentals, the association sent letters to the Acords requesting that they stop their “vacation rental business.” The association’s enforcement efforts lead to the litigation.

The association argued that the transient rentals of the properties violated its restrictive covenants because the properties were being offered and advertised for rent on the internet as transient public lodging establishments, the Acords were required to collect and remit state sales tax and local bed tax on the rentals, and the Acords had obtained a license to operate their properties as transient public lodging establishment under the name “Acord Rental.”

The Acords argued that the short-term vacation rentals were residential uses, and not business uses, because the renters were using the properties for residential purposes.

Quite shockingly, the Court agreed with the Acords providing that the critical issue in determining whether short-term vacation rentals are residential uses of the property is whether the renters are using the property for ordinary living purposes (such as sleeping and eating), not the duration of the rental. Because the renters were using the Acords’ properties for residential purposes, the Court held that the use of the Acords’ properties as short-term vacation rentals is not prohibited by the association’s restrictive covenants.

Therefore, while an association may tackle the issue of transient rentals in its community by enforcing provisions of its governing documents, including for example, minimum lease term requirements and lease approval requirements, as discussed in our prior article, the association’s ability to enforce its residential use requirement and/or commercial use prohibition against short-term rentals has been obliterated as a result of this recent decision. To view our prior article please visit www.rembaumsassociationroundup.com.

Aside from the nuisance and safety issues which arise due to transient renters coming in and out of the community, another more sinister issue has arisen regarding the short-term rental of properties through websites. It seems as though scammers are creating fraudulent online listings through these websites for vacant properties. Through the online listing, these scammers rent the property and collect their fee. However, when the renters arrive at the property, no one is there. With the influx of people’s use of these vacation rental websites, both owners and associations alike need to keep an eye on the listings provided on these websites and the comings and goings within their communities to tackle this transient rental issue.

To ensure your association is properly protected against transient rentals, the association’s lawyer should be asked to review the governing documents to ensure the necessary language is included and to make recommendations to better protect the association from the likes of VBRO and AirBnB rentals.