Author: rembaumlaw

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.

Can a Florida condominium, homeowners’, and cooperative association have liability for its members’ dog bites? Apparently, the answer is yes, it surely can.

In 1996, the Fourth District Court of Appeal of Florida in Barrwood Homeowners Association, Inc. v. Maser, held that an association could be found liable where there was sufficient evidence from which a jury could determine that it was aware of a dog’s vicious propensities. In this case, there was a dog attack and bite to a minor child. The incident occurred on the Association’s common area. The issue in the case was whether or not the Association’s liability could be diminished due to the act of the dog’s owner, who was not named as a defendant in the case.

Thankfully, the court agreed that the Association’s liability could, in fact, be diminished even though the dog’s owner was not a party defendant in the litigation. In reaching its determination, the court affirmed a prior appellate decision reached in 1987 where a landowner could be held liable for damage caused by a dog on its property when there is sufficient evidence from which a jury could determine that the landlord had knowledge of the vicious dog’s presence and had the ability to control the premises. In the instant case, the court found that there was sufficient evidence for a jury to determine whether or not the defendant Association was aware of the dog’s vicious propensities.

In yet another 1996, Fourth District Court of Appeal of Florida case, Sanzare v. Varesi and Coconut Key Homeowners Association, Inc., the plaintiff sued the homeowners’ association after being bitten by a dog on a street owned by the Association. Procedurally, the appellate court initially affirmed the trial court’s summary judgment order reached in favor of the association. Shortly thereafter, the appellate court withdrew its opinion to be consistent with the Barrwood case.

In order for a trial court to grant a motion for summary judgment, there must be no material facts in dispute, and the moving party is entitled to judgment as a matter of the law. Furthermore, the court must draw every possible inference in favor of the party against whom the motion for summary judgment is sought. In fact, summary judgment cannot be granted unless the facts are so crystallized that nothing remains but questions of law.

In its reconsideration of its prior order, the appellate court determined that, in fact, there were factual issues remaining in dispute as to whether the homeowners’ association knew of the presence of and propensities of a vicious dog. In this case, the plaintiff was bitten by a dog owned by two people who leased the home within the homeowners’ association’s community. The bite occurred when the plaintiff was walking his own dog on a street running through the community. After being bit, the plaintiff filed a negligence action against the association. The association argued that it had no duty to the plaintiff. Initially, the trial court agreed, which is why the summary judgment was entered in favor of the homeowners’ association in the trial court. In reversing both the trial court’s summary judgment reached in favor of the homeowners’ association and the appellate court’s own initial ruling, the court noted, from a 1987 case, that a landowner may be liable for injuries resulting from an attack by a bad dog owned by a tenant, if the landowner knows of the presence of the animal and its vicious propensity and has the ability to control its presence.

The appellate court’s initial opinion was flawed because the appellate court had relied on a prior case where there were injuries caused by a dog on property not owned by landlord. In the instant case, the injuries occurred on the property owned by the Association. Therefore, the court relied on the reasoning set out in the Barrwood case.

The take away from all of this is that if a community association is aware that a dog who has a propensity for biting, takes no action and then, an incident occurs where someone is hurt as a result of that dog’s actions, such as a dog bite, then that association can share in the financial liability reached in favor of the victim.

While much of the 2017 legislation recently passed into law affects only condominium associations, Senate Bill 39 (a.k.a., the “Estoppel Bill”) affects condominium, homeowners’, and cooperative associations.

In regard to the Estoppel Bill, remember that in addition to the statutorily required information which must be provided in the association’s estoppel (the subject of prior articles which can be viewed at www.rembaumsassociationroundup.com), the association must provide the estoppel within 10 business days of receipt of the request, and if not so provided, a fee cannot be charged. The association must designate on its website a person or entity with a street or e–mail address for receipt of the estoppel certificate request. The estoppel certificate may be completed by any board member, authorized agent, or authorized representative of the association, including any authorized agent, authorized representative, or authorized employee of the association’s management company. While the fees for the estoppel, a rush estoppel, and a delinquent owner estoppel are set out in the legislation, the authority to charge a fee for the preparation and delivery of the estoppel certificate must be established by written resolution adopted by the board or provided by a written management, bookkeeping, or maintenance contract and is payable upon preparation of the certificate. On the face of it, it would appear prudent for every association to adopt such a resolution. At a minimum, doing so should be discussed with the association’s lawyer.

House Bill 6027 also applies to condominium, homeowners’, and cooperative associations. The requirement that an association may not waive the financial reporting requirements for more than three consecutive years was removed from the Statutes. In addition, the ability of an association comprised of fewer than 50 units, or lots, regardless of the annual revenues, to only prepare a report of cash receipts and expenditures in lieu of the more strenuous financial statement requirements was deleted.

Senate Bill 1520 addresses condominium terminations. Importantly, if 5% or more of the total voting interests of the condominium reject the plan of termination, then the termination may not proceed. This threshold used to be 10%.

House Bill 1237 pertains to condominium associations only. Criminal penalties are now in effect as to any officer or director or manager who knowingly solicits, offers to accept, or accepts anything of value or service of value or who receives a kickback. Similarly, criminal penalties are now available in the event of a forged ballot envelope or voting certificate provided, for theft or embezzlement of association funds, and for the destruction or the refusal to allow the inspection or copying of official records.

The association may not hire an attorney who represents the management company of the association.

In regard to suspension of use rights due to an owner’s failure to pay any fee, fund, or other monetary obligation to the association for a period of greater than 90 days, the amount of money due and owing must be at least $1,000 or more and proof of the obligation must be provided to the unit owner at least 30 days before the suspension may take effect.

Excluding timeshare condominiums, a board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure. In addition, the party contracting to provide maintenance or management services to a condominium association managing a residential condominium, post turnover, which is not a timeshare condominium association, or an officer or board member may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of an association lien for unpaid assessments or take a deed in lieu of foreclosure. If 50% or more of the units in the condominium are owned by a party contracting to provide maintenance or management services to an association managing a residential condominium after turnover, which is not a timeshare condominium association, or by an officer or board member of such party, the contract with the party providing maintenance or management services may be canceled by majority vote of the unit owners other than the contracting party for an officer or board member of such party.

As to which records comprise a part of the “official records” of the Association, “bids for materials, equipment or services” are now specifically included.

Renters now have a right to inspect and copy the association’s bylaws and rules. Oddly, this does not extend to other association records, such as the declaration of condominium and the articles of incorporation.

Insofar as providing unit owners a copy of the most recent financial report, the aggrieved unit owner may file a complaint with the Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division”). Then, the Division may notify the association of the complaint and provide the association five business days to provide the financial report, and if not, then as a penalty, the association may not waive the financial reporting requirements.

A condominium association and its officers, directors, and 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. Doing so, can lead to criminal charges prosecuted as credit card fraud.

Clarification is provided that condominium association board members may serve two-year terms if permitted by the bylaws or articles of incorporation. In addition, a board member may not serve more than four consecutive two-year terms, unless approved by the affirmative vote of two-thirds of the total voting interests of the association or unless there are not enough eligible candidates to fill the vacancies.

There are even changes to the “recall” provisions. In the past, once served with a recall petition, the board is obligated to hold a board meeting within five days, and if it did not certify the recall, then the association was obligated to petition the Division. While the board meeting must still be held within five days, it is no longer incumbent upon the condominium association to notify the Division if it does not certify the recall. Still in effect is the requirement of the board to hold the board meeting within five days to consider whether to deem the recall successful, or not, and if not, then the recall will be deemed effective.

Except for timeshare condominium associations, the 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. However, this does not apply to a service provider in which a board member or officer or relative within the third degree of consanguinity by blood or marriage of a board member or officer, owns less than 1% of the equity shares.

In order to better handle the ever-growing number of condominium association arbitration petitions facing the Division, new provisions are in effect for qualified attorneys to serve as arbitrators. The arbitrator must conduct a hearing within 30 days after being assigned. The failure of such an arbitrator to render a decision within 30 days of the final hearing can lead to the arbitrator’s removal as an arbitrator. There are various requirements to become certified to serve as such an arbitrator.

While new requirements are provided for director and officer conflict of interest situations, they do not apply to timeshare condominium associations. A rebuttable presumption of such a conflict exists if:

1. a director or officer or a relative of a director or officer, enters into a contract for goods or services with the association; or

2. a director or officer, or a relative of a director or an officer, an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association of the process to enter into a contract or other transaction with the association.

If a director or officer or a relative of a director or an officer, proposes to engage in an activity that is a conflict of interest, as described above, the proposed activities must be listed on all contracts and transactional documents related to the proposed activity and must be attached to the meeting agenda. If the board votes against the proposed activity, the director or officer, or the relatives 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 director has violated this provision, then such officer or director shall be deemed to be removed from office vacancy is filled according to general law.

A director or officer or a relative of a director or an officer who is a party to, or has an interest in, any activity that is a possible conflict of interest, as described above, may attend a meeting at which the activity is to be considered by the board and is authorized to make a presentation to the board regarding the activity. After the presentation, the person with the possible conflict of interest must leave the meeting during the discussion of and the vote on the activity. In addition, a director or an officer who is a party to, or has an interest in, the activity must recuse themselves from the vote.

A contract entered into between a director or officer, or a relative of a director or an officer, and the association, that has not been properly disclosed as a conflict of interest or potential conflict of interest 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% of the voting interests of the association.

The legislation also clarifies that the term “relative” means a relative within the third of consanguinity by blood or marriage.

A “receiver” may not exercise any voting rights of the unit owner whose unit is placed in receivership for the benefit of the association.

Importantly, by July 1, 2018, a condominium association with 150 or more units, which does not manage timeshare units, must post digital copies of many official records on the association’s website. The website must be an independent website or a web portal wholly owned and operated by the association. A recorded copy of the declaration of condominium, bylaws, articles of incorporation, and rules, as amended from time to time, must be posted on the website. In addition, the management agreement and all other contracts must be posted, most especially those contracts where a conflict of interest or possible conflict of interest is present. Bids for materials, equipment or services must be on the website for at least one year. The annual budget, financial reports, and proof of director certification requirements must also be on the website. Both unit owner meeting notices and agendas along with board meeting notice and agendas must be posted, too. Finally, the association has an obligation to ensure that those records which are not permitted to be accessible to unit owners are not posted on the website or are properly redacted.

For those following this year’s legislative process, House Bill 653 was vetoed by the Governor. As set forth in his letter vetoing the legislation, the reason for the veto had to do with fire safety opt-out provisions that he indicated appeared to be all the more dangerous given the recent overseas high-rise fire.

When it comes to maintenance, repair, and replacement obligations of the unit owners and the condominium association, the terms of the declaration of condominium reign supreme. At times, there are instances where a unit owner is required to maintain, repair, and replace a portion of the owner’s unit which affects the exterior of the condominium building but that requirement is sometimes in conflict with a prohibition to make alterations to the exterior of the condominium building. An example is needed to bring clarity to this confusing dilemma.

For example, let’s examine the replacement of the unit’s windows. Pursuant to the maintenance obligations in the declaration of condominium, the unit owner is responsible to maintain, repair, and replace all parts of the unit and the fixtures and equipment of the unit, including windows. However, the declaration of condominium also prohibits the unit owner from changing the exterior of the condominium building in any way whatsoever. So, what is this unit owner to do when it comes time to replace the unit’s windows? How can the owner change the window, which requires bringing it up to current building code requirements, where it would result in a change to the exterior of the building?

The Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division”) has addressed this particular scenario, and other similar scenarios, in multiple arbitration cases. While the arbitration decisions promulgated by Division are not binding precedent per se (meaning that other arbitrators or courts do not have to decide similarly when presiding over subsequent cases with similar issues or facts), such arbitration decisions are persuasive and relied upon for guidance.

In Ellis v. Phoenix Towers Condominium Association, Inc., Arb. Case No. 00-1236, Summary Final Order (October 27, 2000), a group of unit owners, which included Ellis, sought to have the association, Phoenix Towers Condominium Association, Inc., replace its windows that were damaged as a result of concrete restoration performed by the association. The association’s declaration of condominium did not provide whether the windows were conclusively part of the unit and therefore the responsibility of the unit owner to maintain, repair, and replace. The association’s declaration of condominium did provide, however, that the unit owner is responsible for “[t]o maintain in good condition and repair his unit… and to maintain and repair the fixtures and equipment therein, which includes but is not limited to the following, where applicable:… windows…” However, the association’s declaration of condominium also provided that the unit owner cannot “…make alterations, decorations, repair, replacement or change of the common elements, or to any outside or exterior portion of the building(s).” The arbitrator in this case determined that the provision prohibiting unit owners from replacing or changing the exterior of the building and the provision regarding the unit owner’s responsibility to replace a window to the unit were in direct conflict with one another. Therefore, the arbitrator decided, “[a]n owner cannot be held responsible for replacing a window to his unit when that owner is precluded from replacing or changing any outside or exterior portion of the building [without regard to] whether or not it is a part of the common elements or his unit.”

While the maintenance, repair, and replacement of the exterior of the condominium buildings were found to be the responsibility of the association in the above case, even where such obligation was expressly that of the unit owner, there are instances where portions of the exterior of the condominium building are the responsibility of the unit owner, namely, where the unit owner has altered the common elements or limited common elements (such as the balcony), which are typically the obligation of the condominium association to maintain, repair, and replace. The Division has addressed this particular scenario in multiple arbitration cases, as well, and has found that the unit owner is responsible to maintain, repair, and replace those components that the unit owner altered – that is, unless the governing documents say otherwise or there is an written agreement for the association to take up such responsibility.

In Continental Towers, Inc. v. Nassif, Arb. Case No. 99-0866, Summary Final Order (November 24, 1999), the condominium association, Continental Towers, Inc., needed to conduct concrete restoration, waterproofing, and other repairs to the unit owners’ balconies. However, Nassif refused to allow the association access to his unit’s balcony to remove its tile flooring in order to effectuate those repairs. In relevant part, Nassif argued that that the association “accepted the tiles as a modification of the common elements or limited common elements and therefore assumed responsibility for maintenance of it” and demanded that the association replace the balcony’s tile. The arbitrator in this case provided and concluded, in pertinent part, that:

“The unit owner is responsible for the removal and replacement of unit owner installed additions to the common elements or limited common elements that are necessitated by the association’s maintenance efforts unless there is a specific agreement by the association, or a provision of the documents, providing that the association will be responsible for the removal and replacement of such improvements. [citation omitted] This is true even where the association may have approved or acquiesced to the addition. As noted by the arbitrator in Carriage House, in the absence of an agreement between the parties or a controlling provision of the documents, ‘it cannot be said from the mere fact of association permission that the association has assumed the perpetual obligation to remove and replace the personal property when necessary to repair and replace the common elements.’… Since… the tile was not part of the original construction, the unit owners are responsible for its removal and replacement.”

Therefore, Nassif was required to remove the balcony tiles so that the association could conduct its repairs and was then responsible to replace the tiles once the repairs were completed.

Again, the arbitration decisions of the Division are specific to the parties and facts presented and are not binding precedent. Actually, these type of issues are one of the most confusing and convoluted parts of the entire body of condominium association law. So, if your association has questions regarding the maintenance and repair obligations and interpretation of your condominium association’s governing documents, you should contact a competent community association attorney for legal guidance.