Use Right Suspensions and Fining, and Protesting Board Action Through Non-Payment of Assessments

Not too long ago, both condominium and homeowners’ associations were provided legislative gift. Regardless of whether or not your community’s declaration provides for use right and voting right suspensions, and fining provisions, the Florida Legislature provided for them for you. They even provided the procedural mechanism to enact them, too. In so far as a member’s monetary delinquent obligation that is greater than 90 days delinquent is concerned,  the board of directors has the power to suspend use rights of common areas and common elements, suspend the delinquent member’s voting rights, and can even levy fines. Comparatively, as it relates to all other types of violations, a committee of members not related to or living with board members must initially decide to enact a suspension or fine and recommend that board adopt the committee’s findings before they can be levied against the offending member. If the board does not agree, the fine or use right suspension cannot be enacted. While in the context of delinquent monetary obligations, the board  makes its decisions at a properly noticed board meeting, which requires 48 hours notice to the community of all items on the agenda, the “covenant enforcement committee” is required to provide the offending member at least 14 days notice and an opportunity for hearing prior to their meeting.

At times I am asked, “how can that be? Can the legislature really just overwrite our governing documents like that?” Well, yes it can… (sort of). The answer depends on whether or not the issue under consideration is a “substantive right” as compared to a “procedural” matter. As often discussed in this column, the declaration of covenants is, at its essence, a contract between the members and their association. While the legislature cannot impair existing contractual rights, it can create new procedures which are binding upon their effective date.

To add some clarity, let’s more closely examine a first mortgagee’s assessment liability after foreclosing its mortgage. As you are undoubtedly aware, for the most part, the successful 1st mortgagee, upon taking title to a unit as a result of their own mortgage foreclosure, is responsible to pay the lesser of 1% of the initial mortgage or 12 months back assessments.  More specifically, in the HOA context, the 1st mortgagee safe harbor only applies to mortgages entered into after the effective date of the legislation, that being July 1, 2008. Therefore, if a mortgage was entered into prior to July 1, 2008 the provisions in the declaration control. The reason is because the legislature cannot impair existing contractual rights. Because the lender made its loan in detrimental reliance upon the terms of the declaration, the legislature could not interfere with the rights created prior to its legislation. Comparatively, in examining use right and voting suspensions along with fines, the Florida Legislature’s recent adoption of new laws in this regard is of a “procedural” nature. Therefore, all condominium and homeowners’ associations must follow the procedures the Florida Legislature has created to enact use right and voting suspensions and the levy of fines, too.

In 2011, in “Tahiti Beach HOA v. Pfeffer”, the 3rd DCA affirmed the trial court’s partial summary judgment in favor of homeowners who were contesting their association’s foreclosure action filed against them based on what tuned out to be an improperly  levied fine for a violation of the governing documents. The association had adopted its fining rules in the early 1990s. In explaining their rationale for supporting the trial court’s decision, the 3rd DCA held that the fining provisions enacted in 1995 by the Florida Legislature were not followed by the association.  Procedural changes in the law apply to all associations retroactively because they do not impair existing contractual rights.  In other words, the association failed to follow the then existing procedural laws when it enacted the fine which formed the basis of the association’s foreclosure. The moral of the story is don’t get caught in the trap of thinking that just because your community’s declaration provides a different use right and voting suspension and fining regime that you can ignore Florida law. If you do, you’ll suffer the same consequences as the Tahiti Beach HOA.

On a different note, it’s hard to fathom that there are still some association members who believe they can withhold payment of assessments as a form of silent protest taken against board action. Do not under any circumstances do that!  Rather, correct way handle the situation is to pay any assessments due. Then, you can separately challenge the board’s action that led to the assessment. In “Coral Way v. 21/22 Condominium Association”, the 3d DCA held that unit owners who argue that their board breached their fiduciary duty could not refuse to pay assessments because of the alleged unauthorized acts. The Court held that a member’s duty to pay assessments is conditioned solely upon unit ownership and whether the assessment complies with the governing documents. The remedy for an upset owner must be brought as an independent claim. Protesting board action through non-payment of assessments has been repeatedly rebuked by the courts.

Posted in Assessments, Covenant Enforcement.