rembaumlaw | Rembaum's Association Roundup

June 10, 2022June 10, 2022

Who Repairs the Incidental Damages Caused by the Association?

Imagine: the association has just informed you it is set to begin a massive concrete restoration project. As part of the project, the contractor will need access to the rebar beneath the concrete slab connected to (or in legalese, “appurtenant to”) your unit’s balcony. To access the balcony slab, the contractor will have to remove the custom Italian tiles you just installed on your balcony. Who is responsible for the costs of the removal? Who is responsible to replace the tiles? The answers to these questions will largely depend on whether the governing documents of the association include an “incidental damage clause” and the specific circumstances of the situation, too.

In its most simplistic sense, an incidental damage clause in the declaration means that the association is responsible to repair any “incidental damage” caused by the association’s exercise of its maintenance, repair, and/or replacement responsibility. However, the existence or absence of such language is not always dispositive as to the repair responsibility. This is similar to “i” before “e” unless after “c” as there always seem to be exceptions.

For example, the repair and replacement obligation of the association may be limited only to damage caused to the unit and not cover any owner improvements to limited common elements, such as the balcony; or the obligation may be limited to damage to improvements only as originally installed by the developer, too. Whether the association or the owner will be responsible to repair the damage is highly fact-specific and will depend on the exact language in the governing documents of the association. Arbitration decisions of the Division of Florida Condominiums, Timeshares, and Mobile Homes (the Division), discussed below, provide some guidance as to when the association may be responsible for incidental damage and when the owners will be responsible to repair same. That said, bear in mind that such decisions are not precedential and in addition only apply to the parties in the arbitration that resulted in the Division’s order. However, it does provide a good understanding of how the Division may rule in a similar circumstance.

As discussed above, where the governing documents contain incidental damage language, and the association damages a portion of the unit while conducting its maintenance, repair, and replacement responsibility, the association is likely responsible for the repair. This is illustrated in Rock v. Point East Three Condominium Corporation, Inc., Arb. Case No. 99-0220, Final Order (September 29, 2000).

In Rock, the association removed a shelf located under a sink and several wall tiles in order to repair rough plumbing in the common elements. The association replaced the wall tiles but did not replace the shelf after the repairs were completed. The unit owner sought, among other things, to have the association replace the shelf. The unit owner also sought to have the association repair tiles in the dining room of the unit which had “popped up” as a result of an unrelated water leak. The association’s declaration of condominium provided that the association was responsible to repair conduits and rough plumbing and provided that “[a]ll incidental damage caused to an apartment by such work shall be promptly repaired by the association.” The arbitrator ordered the association to replace the shelf, holding that the incidental damage to the shelf was caused by the repair to the rough plumbing, which was the association’s duty to maintain. As such, the incidental damage language of the declaration applied to the shelf. However, the arbitrator held the association was not responsible to replace the tiles in the dining room, as the damage to the tiles was not incidental to any work the association performed to repair the rough plumbing.

Therefore, Rock clearly establishes that while an association is responsible to repair portions of the unit that are damaged as a result of the association’s exercise of its maintenance, repair, and replacement obligation, the damage must be incidental to the association’s work.

If the declaration requires the association to repair or replace incidental damage to the unit, the association will likely be responsible to repair and replace owner modifications to the units, too, unless the declaration provides otherwise. In Brickell Town House Association, Inc. v. Del Valle, et al., Arb. Case No. 95-0133 Final Order (September 12, 1995), the association was required to remove certain owner-installed alterations to the unit in order to access and maintain the common elements. The unit owners asserted that the association was responsible to replace the alterations in accordance with the incidental damage provision in the declaration of condominium. The arbitrator agreed, holding that the association was required to reimburse the owners for the expenses required to restore the units to the condition which existed immediately prior to the association’s reconstruction activities, including betterments which were added by the unit owners since the original construction of the units by the developer.

In accordance with the holdings in Brickell and Rock, if the governing documents provide that the association is responsible for incidental damage to the unit, the association will likely be responsible to repair any portions of the unit damaged by the association’s exercise of its maintenance, repair, and replacement responsibility, including alterations made by owners (unless specifically provided for otherwise).

On a different note, if the governing documents of the association contain incidental damage language which is specific to damage caused to units, then the association will not be responsible for incidental damage caused to owner modifications to the common elements or the limited common elements. Similarly, the association will likely not be responsible to repair any damage to any owner alteration to a unit where the declaration required association approval and the owner failed to obtain same prior to installation of the improvement.

In Continental Towers, Inc. v. Nassif, Arb. Case No. 99-0866, Summary Final Order (November 24, 1999), the association needed to conduct concrete restoration, waterproofing, and other repairs to the unit owner balconies. The unit owners had installed tiles on the balcony and argued that the association was responsible for the replacement of the tile because the declaration provided that the association was responsible for incidental damage to the unit. However, the balcony was part of the common elements, not the unit. Therefore, the incidental damage language in the declaration did not apply to the tile, and, absent any other agreement between the parties, the association had no responsibility to repair and replace same. The arbitrator concluded that:

…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.’ The arbitrator adopts the rationale articulated in the Carriage House case. Since the balcony is a part of the common elements, and the tile was not part of the original construction, the unit owners are responsible for its removal and replacement.

Further, where there are owner modifications which were not approved as required by the declaration, the association will likely not be responsible to repair notwithstanding the incidental damage requirement set out in the declaration. In Harrison v. Land’s End Condominium Association, Inc., Arb. Case No. 94-0298, Final Order (June 27, 1995), the association was required to remove an owner-installed balcony finish in order to effectuate repairs to the balcony slab. In this case, the balcony was considered part of the unit, and the declaration contained a provision requiring the association to repair incidental damage to the unit. The declaration also required the owner to obtain approval of the association before making any alterations to the bal-cony. However, the owner never obtained such approval. Therefore, despite the incidental damage provision, the arbitrator determined that the association was not responsible to replace the balcony finish because the owner did not obtain association approval as required by the declaration.

Therefore, if an alteration requires association approval and an owner fails to obtain such approval, the association will far more likely not be responsible to repair any incidental damage to the alteration notwithstanding the existence of incidental damage language.

Generally, the association’s repair obligation is limited to actual damage caused to the unit as a result of its maintenance, repair, and replacement obligation. If the unit owners are required to vacate their unit in order for the association to effectuate the repairs, the association is not generally responsible to reimburse the owners for the costs of same. However, as the Brickell case, discussed above, shows us, that is not always the case. In Brickell, the owners also argued that the association was responsible to reimburse them for the costs they incurred in vacating the unit for the repairs. In this case, the association chose to proceed with a method of repairing damage to common element pipes from the interior of the units, which required the unit owners in the affected units to vacate. The association did not explore an option in which the repairs could be made from the exterior, which would permit the unit owners to remain in the unit. The arbitrator agreed with the owners and ordered the association to pay for the costs the owners incurred in vacating the units. As you can glean, this case is very fact specific, which led to this outcome.

In an order denying the association’s motion for rehearing, the arbitrator in Brickell, reiterated its earlier decision that the board, within its business judgment, decided to proceed with a method of reconstruction that required the removal of the owners. Therefore, the expenses of those owners are a common expense to be borne by all owners. The important consideration in this case was the fact that the association proceeded with the repairs from the interior without exploring options to proceed from the exterior. The arbitrator notes that the order should not be construed to mean that an association would be responsible for accommodations for all unit owners in the event that the condominium building had to be tented for termites, or if a hurricane rendered the building uninhabitable. In those cases, all owners would be required to vacate the units, and there can be no other decision of the board. Additionally, in Brickell, if there was no way for the association to make the repairs that would allow the owners to remain in unit, the arbitrator’s decision may have been different. How-ever, as the association chose to displace certain unit owners to effectuate the repairs without exploring any other options, the association was responsible for the owners’ costs to vacate.

Finally, even when there is no incidental damage language in the governing documents, the association may be responsible for damage to the units if the association fails to conduct necessary maintenance to the common elements, when the association knows that such maintenance is necessary. In Dibiase v. Beneva Ridge, Arb. Case No. 92-0210, Final Order (January 19, 1994), the association was aware that the common element parking area was consistently flooding into an owner’s unit. The association retained an engineer to conduct a drainage study, and the engineer recommended several remedial measures to address the drainage problem. While the association took some remedial steps, the association did not follow through on the study’s recommendations. The arbitrator concluded that the association was responsible for the owner’s costs to repair the unit caused by the flooding. The arbitrator explained that, while “[n]o association is required to protect the property against a 100-year storm…” the association was responsible to take those steps reasonably necessary to protect the condominium property.

As the association had an expert report that advised if the association did not take certain remedial measures, the damage to the condominium property would continue, the association had an obligation to make the repairs. As the association failed to follow the report, it was responsible for the damage caused to the unit.

In accordance with the decision in Dibiase, if the association receives a report from an expert advising that certain repairs must be performed, and the association fails to take action, the association may be responsible for the costs of any damage to the units caused by its failure to act.

As you have likely gleaned from the foregoing discussion, it can be difficult to determine who is responsible to repair and replace improvements damaged during the association’s exercise of its maintenance, repair, and replacement obligations. Given the complexities of the issue, your association should consult with its legal counsel with any inquiries regarding the association’s responsibility for incidental damage.

May 26, 2022May 27, 2022

News from CAI | Condo Safety Legislation Passed in Special Session

News from Community Associations Institute: Condo Safety Legislation Passed in the Special Session

Per a May 26, 2022 email we received from CAI: This week the Florida legislature was in special session and condominium safety was one of three initiatives addressed. CAI Florida Legislative Alliance is pleased to announce that SB 4D – Building Safety Act for condominium and cooperative associations passed unanimously through both the House and Senate on May 24th and 25th respectively, after a powerful and heartfelt appreciation for the sponsors, Sen. Jennifer Bradley (R-5), Senator Jason Pizzo (D-38) and Rep. Daniel Perez (R-116) was expressed by Members in both the House and Senate. Governor DeSantis signed the bill on May 26th. This bipartisan legislation is the result of tireless advocacy by you, our membership; thanks to your determination, CAI Florida Legislative Alliance was able to work with legislators in both chambers to craft an effective condo safety bill that will protect Floridians. CAI representatives were in Tallahassee this week during the legislature’s special session and were the only ones to speak on behalf of the new bill.

The legislation includes a framework largely based on CAI public policy recommendations for:

Building inspections as structures reach 30 years old and every 10 years thereafter.
Mandatory reserve study and funding for structural integrity components (building, floors, windows, plumbing, electrical, etc.).
Removal of opt-out funding of reserves for structural integrity components.
Mandatory transparency—providing all owners and residents access to building safety information.
Clear developer requirements for building inspections, structural integrity reserve study, and funding requirements prior to transition to the residents.
Engagement of the Florida Department of Business and Professional Regulation and local municipalities to track condominium buildings and the inspection reporting.

Associations will have two years to comply with these requirements. CAI will be working closely with policymakers before the bill takes effect in 2024 to be certain the new requirements and directives are workable and practical for Florida’s impacted associations.

Since June 24, 2021, the tragic collapse of Champlain Towers South where 98 people perished and many others lost their homes, CAI mourned, prayed, and committed to doing whatever we could to make sure this never happened again. Following the collapse, CAI members and volunteers worked closely with Florida Sens. Jennifer Bradley and Jason Pizzo, as well as Rep. Daniel Perez to lead the efforts to pass this important legislation.

The comprehensive legislation makes certain that no matter in what county a condominium or cooperative is located, they will be periodically inspected with information shared with unit owners, local building officials, and prospective buyers. CAI will continue working with policymakers to make certain that associations have the time to meet these changes and that these new processes are practically workable for associations while making certain they are fiscally sound and physically safe.

Sincerely,
CAI Florida Legislative Alliance

May 25, 2022May 27, 2022

Can You Repeat That? Is Your Condominium in Compliance?

If your condominium is greater than 75 feet tall, then you need to read this article.

It is essential for condominium associations to ensure that their buildings are in compliance with the requirements of the Florida Fire Prevention Code (the “Fire Code”). For the safety of all residents, associations must ensure they stay up to date with the latest and greatest in fire safety provisions. One of these essential safety features is a requirement that systems be built into new and existing buildings to ensure that first responders’ radios will work throughout buildings in an emergency situation. Pursuant to Section 11.10.1 of the Fire Code, “in all new and existing buildings, minimum radio signal strength for fire department communications shall be maintained at a level determined by the AJH [the authority having jurisdiction]. Additionally, Section 11.10.2. provides that where required by the authority having jurisdiction, two-way radio communication enhancement systems must comply with the requirements of the Fire Code.

When originally adopted, the requirements of Sections 11.10.1 and 11.10.2 of the Fire Code applied only to new buildings, so the requirement was not a burden on existing buildings. However, in 2013, the Fire Code was updated as set out above to provide that all new and existing buildings must maintain adequate fire department radio signal strength inside the building. This new requirement applied to all buildings and did not provide a grace period. This posed a significant problem for many high-rise condominiums, as the installation of the necessary equipment involves opening walls and ceilings and can be quite costly to the association. The cost of such installation was a substantial burden to condominiums, not expecting to be required to install same, and therefore never budgeted for the installation.

Recognizing the problem, in 2016 the Florida Legislature adopted section 633.202(18), Florida Statutes, which provided a grace period for high-rise buildings. Existing high-rise buildings were not required to comply with minimum radio strength for fire department communications until January 1, 2022. You may be thinking, “that date is passed”, but do not panic. If your condominium has not yet complied with the requirements, have no fear. The 2021 Florida Legislature amended section 633.202(18), Florida Statutes, to provide another extension for compliance.

In accordance with the newly amended statute, existing high-rise buildings now have until January 1, 2025 to come into compliance with the requirements. However, the association must apply for an appropriate permit for the required installation by January 1, 2024. More specifically, section 633.202(18), Florida Statutes, is amended to provide, in pertinent part, that:

(18) The authority having jurisdiction shall determine the minimum radio signal strength for fire department communications in all new high-rise and existing high-rise buildings. Existing buildings are not required to comply with minimum radio strength for fire department communications and two-way radio system enhancement communications as required by the Florida Fire Prevention Code until January 1, 2025. However, by January 1, 2024, an existing building that is not in compliance with the requirements for minimum radio strength for fire department communications must apply for an appropriate permit for the required installation with the local government agency having jurisdiction and must demonstrate that the building will become compliance by January 1, 2025. Existing apartment buildings are not required to comply until January 1, 2025…

Therefore, all existing high-rise buildings must come into compliance by January 1, 2025. It is important to note that this time extension applies only to high-rise buildings. By way of over simplification, it does not apply to buildings less than 75 feet tall (the measurement can be tricky, so if your building is close to 75 feet check with your association attorney regarding this measurement). In 2018, the Florida Department of Financial Services, Division of State Fire Marshal issued a Declaratory Statement finding that section 633.202(18), Florida Statutes does not apply to the enforcement of Section 11.10 of the Fire Code to buildings under 75 feet in height. Therefore, if your building is greater than 75 feet in height, it is required to comply with the radio signal strength required by the authority having jurisdiction at this time.

In light of the foregoing, it is essential that your association take action to determine whether sufficient fire department radio signal exists in your building. We recommend the association reach out to the local fire code official to determine the exact requirements for your jurisdiction. If sufficient signal does not exist in your building, it is essential to prepare a plan (including design, permits, financing, etc.) to ensure that your building will comply by the deadline of January 1, 2025.

May 16, 2022May 16, 2022

Follow-up | All 2022 Champlain Towers-Inspired Bills Fail – Perfect Opportunities Lost

All 2022 Champlain Towers-Inspired Bills Fail: Perfect Opportunities Lost

As a result of the 2022 Florida legislative session, there will be no new statutes requiring mandated building/engineering inspections, no statutory changes to budgeting procedures, no mandated reserve study requirements, and no statutory changes to required disclosures. On March 11, reporters Jon Schuppe and Phil Prazan, of NBC 6 South Florida, reported,

Negotiations between the Florida Senate and House of Representatives, both controlled by Republicans, broke down, with the two sides unable to agree on a bill that would require inspections of aging condo buildings and mandate that condo boards conduct studies to determine how much they need to set aside for repairs. The talks were undone by a disagreement over how much flexibility to give condo owners in the funding of those reserves.

However, the failure of the legislation does not mean a board of directors can ignore their fiduciary duties and obligations. While only two Florida counties have mandated, in their code of ordinances, that older condominium buildings have life-safety inspections, (Miami–Dade and Broward counties as well as a couple of cities), that does not mean required maintenance and proper planning can be otherwise avoided. Board members must exercise their fiduciary duties with due care and due diligence. Depending upon the age of your condominium building, voluntary engineering inspections and professional reserve studies should already be taking place on a regular schedule. Capital repair and replacement projects should already be a part of the association’s planning processes.

As explained by board certified specialist in condominium and planned development law attorney Lisa Magill,

Is the law the only reason you stop at a red light? Probably not. You stop because there’s a likelihood a truck will smash into you from the side [if you do not].

In other words, common sense should prevail. All condominium unit owners know that one day the roof, air conditioners, and water and cooling towers will need to be replaced; the building will need to be repainted to ensure a watertight seal remains intact; the pool will need re-surfacing; and the parking areas and asphalt will need attention, too. Perhaps one of the most expensive repairs, which is rarely discussed, let alone planned for and budgeted in advance, and that even the Florida Statutes do not specifically mention by name, is concrete restoration, with repair costs potentially reaching into the millions of dollars depending on the extent of the repairs. But, such repairs are a given. It is not a matter of “if” but rather only a matter of “when” these repairs will be required.

[i]n addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The amount to be reserved must be computed using a formula based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance.”

While a majority of a quorum of the membership can vote to waive or reduce reserves, this can only occur if the board of directors provides the membership such opportunity. For example, when voting to reduce reserves, the percentage by which the required reserves can be reduced is decided in advance by the board and then presented to the membership for the vote. In light of the Champlain Towers South disaster, boards of directors should put considerable thought into these decisions.

On March 12, Ann Geggis of Florida Politics reported that

the Legislature’s inability to pass any legislation updating condo regulations in the wake of last summer’s disaster that killed 98 people stunned observers…For this Session, nine bills sought to change rules regarding condominium associations…An estimated two million people live in 912,000 Florida condo units that are 30-years or older. Another 131,773 units are 20 to 30 years old, according to the Florida Engineering Society & American Council of Engineering Companies of Florida….The executive director of the engineering society and council called the failure to pass any legislation this year a ‘missed opportunity,’ according to a news release.

Never has the term “sausage factory” been more appropriate to describe the 2022 team of Florida legislators who failed to pass meaningful legislation that could have helped thwart another Champlain Towers South disaster. But, just because the legislature failed in doing so (for this year), that does not mean, as a board member, that you will fail, too. Make a commitment to your condominium community to plan for the future. Adopt a board resolution, or even amend the condominium declaration, to have required building inspections and reserve studies. In addition, if your association is waiving reserves year after year, stop it and start saving for the future. You will be glad you did.

April 4, 2022April 5, 2022

Board Member to Board Member Emails—Are They Official Records? | Division of Condominiums Muddies The Waters

Board Member to Board Member Emails—Are They Official Records? Division of Condominiums Muddies The Waters

On January 6, 2022, the Department of Business and Professional Regulation (DBPR), through the Division of Florida Condominiums, Timeshares, and Mobile Homes (Division), entered a Final Order Granting Petition for Declaratory Statement in the matter of In re: Petition for Declaratory Statement, James Hanseman, Petitioner (the Hanesman Declaratory Statement). In this Final Order, the Division Director (Chevonne Christian) stated that all board member to board member emails are official records of the association. Unfortunately, this Order was entered i) without regard to who owns the device from which the email was sent;

ii) without regard to whether the manager was included in the email chain; iii) without regard to whether the email was sent to a minority or majority of board members; and iv) without regard to the board members’ constitutional right of privacy. The decision does not consider the sacrosanct requirement that a quorum of board members is needed to conduct business. If a board member can enter into a conversation with a minority of the board without triggering a required meeting notice, then a board member should also be able to communicate, by any means, with a minority of the board, including email, without it rising to the level of being considered an official record of the association. However, given the scope of the Order, this will likely require an act of the Florida legislature to accomplish.

In general, a petition for declaratory statement may be used to resolve questions or doubts as to how the statutes, rules, or orders may apply to the petitioner’s particular circumstances. These statements are only binding upon the parties who join in the proceeding. The Division issues “declaratory statements” when requested by parties who are unclear about the applicability of portions of the Condominium Act, Chapter 718, Florida Statutes. Declaratory statements are formal written positions taken by the Division on the laws and rules the Division is authorized to enforce and interpret. Importantly, with regard to the Hanesman Declaratory Statement’s precedential value, it has none whatsoever. It only applies to the parties named in the Hanesman Declaratory Statement, which includes the petitioner, Mr. Hanseman, and the Wildewood Springs II-B Condominium Association Inc. This decision is merely persuasive authority, at best. In fact, the Division does not even have to follow their own written precedent. Yet, it is predictive as to how the Division will rule should a similar fact pattern be presented. So, beware!

The Hanesman Declaratory Statement could stand for the broader proposition that all director emails are official records of the association, or perhaps it stands for the narrower proposition that board member emails are not automatically excluded as an official association record merely because the emails were sent from a director’s private email address and privately owned computer. Time will tell, I hope. In the meantime, applying its broadest interpretation means that the Division has now opined that all director-to-director emails are official records. This broad interpretation means such emails must be produced in response to a member’s official records request, unless later excluded from production due to matters of privilege. This broad interpretation also means that for all requests to inspect the official records of the association, directors will have to search their own hard drives and provide copies to the manager or whoever is coordinating the inspection. If this broad interpretation is to be applied, it is yet another burdensome requirement for board members and could be viewed as an extreme overreach of a governmental administrative agency. In light of this possible interpretation and obligation to turn over board member to board member emails, who will want to serve on the board, now?

Let us examine the history of this important topic. On March 6, 2002, Sue Richardson, the Chief Assistant General Counsel of the DBPR, issued an opinion which provided that “[c]ondominium owners do have the right to inspect email correspondences between the board of directors and the property manager as long as the correspondence is related to the operation of the association and does not fall within the…statutorily protected exceptions…[The DBPR does not have] regulations expressly requiring archiving emails, but…if the email correspondence relates to the operation of the association property, it is required to be maintained by the association, whether on paper or electronically, under chapter 718, Florida Statutes.”

In Humphrey v. Carriage Park Condominium Association Inc. Arb. Case No. 2008-04-0230 (Final Order, March 30, 2009), the arbitrator of the Division ordered that

“…emails…existing…on the personal computers of individual directors…are not official records of the association…Even if directors communicate among themselves by email strings or chains, about the operation of the association, the status of the electronic communication on their personal computer would not change. Similarly, an email to an individual director or to all directors as a group, addressed only to their personal computers, is not a written communication to the association.”

The arbitrator reasoned that “[t]his must be so because there is no obligation to turn on [the] personal computer with any regularity, or to open and read emails before deleting them.”

Then, on July 1, 2014, the Florida Legislature amended s. 718.112(2)(c) to provide that board members may communicate via email. Just because the legislature clarified that directors may do so does not mean that such email communications should automatically be considered official records of the association. Board members are not publicly elected officials. Yet, the Division’s recent Hanseman Declaratory Statement creates a basis to conclude that the Division desires to hold a director’s email communications to the same standards.

A condominium association is a privately owned entity whose members elect representatives to effectuate the orderly operations of the association. Serving as a board member of a condominium association is not at all akin to holding public office, and in our opinion, board members should not be held to the same standard as that of elected officials. The last thing a community association board member needs is to be micromanaged by one or more cantankerous owners and the vocal minority.

In the Hanesman Declaratory Statement, Ms. Christian takes the position that because §718.111(12)(a), Fla. Stat., provides, in relevant part, that the “official records of the association” include “all of the written records of the association not specifically included in the foregoing which are related to the operation of the association,”

that nothing exempts records when created or transmitted with a board member owned device rather than association owned device.

She then applied what she referred to as the plain meaning of the term “writing,” referring to the definition of the term from Black’s Law Dictionary (11th ED. 2019), which provided “emails constitute a form of writing.”

In fact, had the Florida Legislature intended for emails from one board member to another to be considered official records subject to inspection, then when it amended Chapter 718.112, eff. July 1, 2018, to provide that “members of the board of administration may use email as a means of communication but may not cast a vote on an association matter via email,” the legislature could have clarified that such emails were considered a part of the official records. Obviously, the legislature did not do so. This can only mean that the legislature had no intent whatsoever for a director’s email sent from their personal computer to a minority of other board members to be considered an official record.

What is the end game of the Hanesman Declaratory Statement? The implications are far-reaching, indeed. Does this mean that text messages must be disclosed? What about communications on messaging apps such as WhatsApp and Signal? If not, why not? The logic is arguably the same. What about conversations held with a board member outside of a meeting—must the board member make a disclosure he or she had such conversation at the next noticed meeting? Where does it end?

It is rather common knowledge that there is already a mechanism in the law to acquire documents of every kind. It is called a “subpoena duces tecum” and is used in active litigation to compel production of documents. In this author’s opinion, that is the only circumstance in which a board member’s private emails must be produced, unless and until the Florida Legislature or an appellate court squarely addresses this issue.

As the phrase goes, “one step forward and two steps back.” In other words, while a board member can use email to communicate with a fellow board member, it may come with the steep price of later required disclosure. So, if you want to avoid email disclosure, you may want to consider using a phone to discuss matters. If you want to play it really safe, then be sure to only chat to a minority of board members, too. Until there is an appellate court decision or statutory law that squarely addresses email disclosure, please be sure to discuss these matters with your association’s attorney. In the meantime, perhaps consider using dedicated association-hosted email addresses for association-related emails.

March 14, 2022March 23, 2022

Last Surfside-Inspired Bill Fails | A Perfect Opportunity Lost

LAST SURFSIDE-INSPIRED BILL FAILS: A Perfect Opportunity Lost

While only a very few Florida counties have mandated in their code of ordinances that older condominium buildings have life-safety inspections, that does not mean required maintenance and proper planning can be otherwise avoided elsewhere. Board members must exercise their fiduciary duties with due care and due diligence. Voluntary engineering inspections and professional reserve studies should be considered to take place on a regular schedule. Maintenance, repairs, and replacements should be budgeted and funding sources properly identified.

As often explained by Board Certified attorney Lisa Magill, “is the law the only reason you stop at a red light? Probably not. You stop because there’s a likelihood a truck will smash into you from the side.” In other words, common sense should prevail. All condominium unit owners know that one day the roof, air conditioners, and water and cooling towers will need to be replaced, the building will need to be painted to ensure a water tight seal remains intact, the pool will need re-surfacing, and the parking areas and asphalt will need attention, too. Perhaps one of the most expensive repairs, which is rarely discussed, let alone planned for and budgeted in advance, that even the Florida Statutes do not specifically mention it by name, is concrete restoration, which can cost tens of thousands of dollars, and often such repairs cost millions of dollars depending on the extent of the repairs. But, such repairs are a given. It is not a matter of “if” but rather only a matter of “when” these repairs will be required.

The only way to avoid a revolt of the membership when explaining the upcoming multi-million dollar assessment is to lessen the blow by having some, if not all, of the needed monies already saved in a reserve account. Section 718. 112(1)(f)(2)(a), Florida Statutes, provides that, “[i]n addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The amount to be reserved must be computed using a formula based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance.”

While a majority of the quorum of the membership can vote to waive or reduce reserves, this can only occur if the board of directors provides the membership such opportunity. For example, when voting to reduce reserves the percentage by which the required reserve can be reduced is decided in advance by the board and then presented to the membership for the vote. In light of the Champlain Towers South disaster, boards of directors should put considerable thought into these decisions.

On March 12, Ann Geggis of Florida Politics reported that “the Legislature’s inability to pass any legislation updating condo regulations in the wake of last summer’s disaster that killed 98 people stunned observers…For this Session, nine bills sought to change rules regarding condominium associations…An estimated two million people live in 912,000 Florida condo units that are 30-years or older. Another 131,773 units are 20 to 30 years old, according to the Florida Engineering Society & American Council of Engineering Companies of Florida….The executive director of the engineering society and council called the failure to pass any legislation this year a ‘missed opportunity,’ according to a news release.”

On March 11, Jon Schuppe and Phil Prazan, NBC 6 South Florida reported that, “[i]n the nine months since 98 people died in the collapse of a Surfside, Florida, condominium, state lawmakers have pledged to pass measures that could help avoid a similar disaster. On Friday, they failed.”

“Negotiations between the Florida Senate and House of Representatives, both controlled by Republicans, broke down, with the two sides unable to agree on a bill that would require inspections of aging condo buildings and mandate that condo boards conduct studies to determine how much they need to set aside for repairs. The talks were undone by a disagreement over how much flexibility to give condo owners in the funding of those reserves.”

Never has the term “sausage factory” been more appropriate to describe the 2022 team of Florida legislators who failed to pass meaningful legislation that could have helped thwart another Champlain Towers South disaster. But, just because the legislature failed in doing so (for this year), that does not mean, as a board member, that you can fail, too. Make a commitment to your condominium community to plan for the future. Adopt a board resolution, or even amend the condominium declaration, to have required building inspections and reserve studies. In addition, if your association is waiving reserves year after year, stop it and start saving for the future. You will be glad you did.

March 3, 2022March 18, 2022

Borrowing to Buy a Condominium Unit? | Freddie Mac’s & Fannie Mae’s New Lending Requirements

BORROWING TO BUY A CONDOMINIUM UNIT? Freddie Mac's & Fannie Mae's New Lending Requirements

Buying a bundle of home loans to later sell on the secondary market can be risky business. A lot can go wrong in the process. For example, the economy could tank, causing massive defaults; or even worse, as occurred recently in the case of Champlain Towers South, the building could collapse—where not only did many residents die, but also insurance proceeds are unlikely to be sufficient to satisfy all of the outstanding mortgage debt. This reality has a ripple effect on the mortgage-backed security, ultimately causing financial harm to the investors buying the bundled mortgages.

The Federal Home Loan Mortgage Corporation, commonly referred to as “Freddie Mac,” and the Federal National Mortgage Association, commonly referred to as “Fannie Mae,” both compete on the secondary mortgage market, which is the market for the sale of securities or bonds collateralized by the value of mortgage loans. In short, they both package mortgages into mortgage-backed securities for sale to investors on the secondary mortgage market. Both Fannie Mae and Freddie Mac have requirements which must be met before they will buy a mortgage from a local lender, which they appropriately refer to as the “seller.” The Fannie Mae and Freddie Mac requirements placed on the seller (meaning, the local lender) trickle down to and then must be met by the association. The association’s compliance with these requirements is then analyzed by the local lender and likely further analyzed by Fannie Mae or Freddie Mac as a part of its bundled loan purchase.

The mortgages they purchase help ensure that home buyers and investors who purchase property have a steady and stable supply of mortgage money. They broaden the likelihood of funds being made available for housing by attracting new secondary mortgage market investors through offering packaged mortgage-backed securities and guaranteeing the timely payment of principal and interest on the underlying mortgages. This makes secondary mortgage markets more liquid and can help lower interest rates paid by the actual mortgage borrowers (i.e., the property purchasers). It is reported that at times, together they finance up to 90 percent of all residential mortgages. Without Freddie Mac and Fannie Mae buying mortgages from lenders, the lenders would not be in a position to continue to offer loans. They need the funds from the Freddie Mac or Fannie Mae purchase to have available funds to make new loans. The bottom line is that if you expect purchasers in your condominium to be able to obtain a loan, then ultimately your association will have to abide by their requirements, including their demand for information about your condominium building’s condition and the condominium association’s finances, which are set out in their similar questionnaires.

Congress created Fannie Mae in 1938 to provide accessible funding and more affordable housing. Freddie Mac, alternatively, started in 1970 as a public enterprise to further expand the secondary mortgage market. While there are many similarities between Fannie Mae and Freddie Mac, there are some key distinctions. The significant difference between Freddie Mac and Fannie Mae is where they acquire their mortgages. Fannie Mae purchases mortgages from larger, commercial banks, while Freddie Mac buys them from much smaller banks. While Fannie Mae and Freddie Mac programs have some differences in lending requirements, these requirements also appear more similar than different in so far as they assure the lender they will buy the loan.

As a result of the Champlain Towers South collapse, Fannie Mae and Freddie Mac have imposed new temporary, additional requirements for mortgages obtained for condominiums and cooperative residential units. These new additional requirements will make it harder for existing condominium unit owners to refinance and for new buyers of condominium units to obtain mortgages.

On October 13, 2021, Fannie Mae issued Lender Letter LL-2021-14 entitled “Temporary Requirements for Condo and Co-op Projects,” resulting with a new questionnaire effective January 1, 2022. In so doing, Fannie Mae suspended flexibility that allowed a lender to obtain a reserve study in lieu of meeting the 10 percent budget reserve requirement. Simply put, this means that if an association does not reserve at least 10 percent of its total annual budget for reserves, then any lender working with Fannie Mae will not be in a position to issue a loan to anyone purchasing a unit in that association’s condominium because doing so would make that loan ineligible for purchase by Fannie Mae, which ultimately hurts the local lender because it will have less funds to loan.

Moreover, Fannie Mae will no longer issue project eligibility waivers for significant deferred maintenance or for projects subject to large special assessments. In other words, if the condominium association is not contributing at least 10 percent of its annual budget into the reserves, then Fannie Mae will not buy the loan from the local lender, meaning that the local lender will most likely not issue the loan to the buyer. In addition, and as part of its 10 percent reserve requirement, Fannie Mae no longer allows a borrower to rely on a reserve contribution provided in a reserve study in lieu of meeting the requirement that 10 percent of the annual assessments be contributed to reserves. Therefore, Freddie Mac-backed loans will become even more important to purchasers of condominium units and the developers who build them.

Then, on December 15, 2021, Freddie Mac issued Bulletin 2021–38 entitled “Temporary Condominium and Cooperative Project Requirements and Topic 5600 Reorganization,” effective February 28, 2022 (the “Bulletin”). While Freddie Mac has strict requirements, too, it is not strictly requiring that 10 percent of the association’s budget be allocated to the association’s reserves. The Bulletin begins with the following statement of fact:

In the aftermath of the collapse of the Champlain Towers South in Surfside, Florida, the risks of residential buildings with aging infrastructure and in need of Critical Repairs have been brought to the forefront of discussion throughout the nation.

Regarding reserves, local lenders may continue to rely on a working capital fund for new condominium projects or a reserve study for both established and new condominium projects when the project’s budget provides less than 10 percent replacement reserves. In other words, as so succinctly explained by a regular reader of Rembaum’s Association Roundup, Barry Subkow, Esq.,

Unlike Fannie Mae, if the contribution to reserves is less than 10% of the total annual assessments (e.g., 8%) and is based on the reserve contribution amount that is provided in a reserve study, Freddie Mac will allow the loan.

These newest Freddie Mac temporary requirements apply to all mortgages secured by units in projects with five or more attached units and are in addition to, and do not supersede, any of the other existing current applicable requirements. As such, there are terms which every board member and manager should become familiar with as they are needed to complete the required questionnaires. For example, a loan given by a local lender to a buyer for a project in need of “critical repairs” (as defined below) is not eligible for sale to Freddie Mac. As a result, the local lender will not be inclined to make the loan if a governmental program entity, such as Freddie Mac, is not willing to buy the loan.

Because Freddie Mac secured mortgages are likely to become even more important in today’s economy, there are four terms with which every board member and manager should be familiar:

Critical repairs
Material deficiencies
Significant deferred maintenance
Routine repairs and maintenance

The term “critical repairs” refers to repairs and replacements that significantly impact the safety, soundness, structural integrity, or habitability of the project’s building(s) and/or that impact unit values, financial viability, or marketability of the project. These repairs and replacements include the following:

All life safety hazards
Violations of federal, state, or local law, ordinance, or code relating to zoning, subdivision and use, building, housing accessibility, health matters, or fire safety
Material deficiencies (see below for definition)
Significant deferred maintenance (see below for definition

The term “material deficiencies” is defined as unresolved problems that cannot reasonably be addressed by normal operation or routine maintenance and which include the following:

Deficiencies which, if left uncorrected, have the potential to result in or contribute to critical element or system failure within one year
Deficiencies that will likely result in a significant escalation of remedial cost related to any material building components that are approaching, have reached, or have exceeded their typical expected useful life or whose remaining useful life should not be relied upon in view of actual or effective age, abuse, excessive wear and tear, poor maintenance, and/or exposure to the elements
Any mold, water intrusions, or leaks that are potentially damaging to the project’s building(s)

The term “significant deferred maintenance” is defined as the postponement of normal maintenance, which cannot reasonably be resolved by normal operations or routine maintenance, and which may result in any of the following:

Advanced physical deterioration
Lack of full operation or efficiency
Increased operating costs
Decline in property value

The term “routine repairs and maintenance” is defined as repairs and maintenance that are expected to be completed by the project in the normal course of business and are nominal in cost. These repairs are not considered to be critical and include the following types of work:

Often preventive in nature
Accomplished within the project’s normal operating budget
Typically completed by onsite staff
Focused on keeping the project fully functioning and serviceable
Minor deficiencies with a cost of $3,000 or less per repair item that do not warrant immediate attention but that require repairs or replacements that should be undertaken within the next 12 months
Scheduled repairs and maintenance that are fully funded, may have a cost greater than $3,000, and will be undertaken within the next 12 months

Any documentation used by the local lender to determine the eligibility of projects in need of critical repairs must be retained and provided to Freddie Mac upon request. Violations of state or local law, ordinance, or code, as referenced in the critical repairs definition, include failure by the association to schedule an inspection required by the applicable jurisdiction and any directive from a regulatory authority or inspection agency to make critical repairs. Projects in need of critical repairs remain ineligible until the required repairs and/or inspection report have been completed and documented. Sellers of the proposed loan (i.e., the local lender) must review an engineer’s report, or substantially similar document, to determine that the repairs resolved the building’s safety, soundness, structural integrity, or habitability concerns. Acceptable sources of documentation to determine if a project is in need of critical repairs may include but are not limited to the following:

Board meeting minutes
Engineer’s reports
Reserve studies
List of necessary repairs
Other substantially similar documentation

The Freddie Mac restrictions on the purchase of loans from lenders does not apply to the following:

Routine repairs and maintenance, (as defined above) or
Damage or deferred maintenance to one or a few units in the project, provided that there is no impact to the overall safety, soundness, structural integrity, or habitability of the improvements

When determining if a repair is a routine repair or maintenance, Freddie Mac reminds the local lender that its condominium project budget requirements include determining that appropriate assessments are established to manage the project and that there are appropriate allocations for line items pertinent to the type and status of the condominium project. Sellers (meaning, the local lender) should evaluate the line items on the budget, especially those for repairs and maintenance, and the amounts associated with those line items as part of the seller’s project review process.

Regarding any current special assessment, even if paid in full for the subject unit, such special assessment must be reviewed to determine eligibility. This includes any special assessment that the board approved and, if required, owners approved, but the board has not initiated collection yet (e.g., a planned special assessment). The local lender must determine the following:

The reason for the special assessment
The total amount assessed
For current special assessments, that the total amount is an appropriate allocation or, for planned special assessments, there is adequate cash flow to fund the reason for the special assessment, and
For current special assessments, that the amount budgeted to be collected year-to-date has been collected

To determine that the amount budgeted to be collected year-to-date (YTD) has been collected, the following criteria apply:

The seller must review an income statement or a substantially similar document which has YTD budgeted and actual amounts for the special assessment,
The document should be dated within 90 days of the project review date, and
Any shortfall between the budgeted and actual YTD amounts for the special assessment must not be more than five percent.

Any documentation used to determine the eligibility of the special assessment, such as the income statement referenced above, must be retained by the local lender and provided to Freddie Mac upon request. In addition, special assessments with more than 10 monthly payments remaining must be included in the calculation of the monthly housing expense-to-income ratio and must be documented.

If a seller (the local lender) relies on a reserve study, then the seller must ensure the reserve study meets certain requirements, which include, but are not limited to the following:

A reserve study’s financial analysis must validate that the project has appropriately allocated the recommended reserve funds to provide the condominium project with sufficient financial protection comparable to Freddie Mac’s standard budget requirements for replacement reserves. (Note—This requirement must be discussed and is required as a part of any professional’s reserve report.)
The reserve study’s annual reserve funding plan, which details total costs identified for replacement components, must meet or exceed the study’s recommendation and conclusion.
The most current reserve study (or update) must be dated within 36 months of the seller’s determination that a condominium project is eligible.
The reserve study must be prepared by an independent expert skilled in performing such studies (such as a reserve study professional, a construction engineer, a certified public accountant who specializes in reserve studies, or any professional with demonstrated experience and knowledge in completing reserve studies).

Freddie Mac advises its sellers (the local lender) to evaluate the reserve study’s financial analysis. Sellers should compare, for the current fiscal year, the estimated beginning of the year (BOY) reserve fund balance in the reserve study to the actual BOY reserve fund balance. The reserve study’s recommended reserve allocation for the current fiscal year correlates to the project starting the year with that estimated reserve fund balance. If the project started the year with significantly less than what was estimated, then the project has likely failed to appropriately allocate the recommended reserve funds to provide the condominium project with sufficient financial protection.

If your association is not Freddie Mac eligible under these terms, then a local lender can submit a project waiver request (PWR), which, however, has many other strict requirements that are not further discussed herein.

The Freddie Mac Bulletin can be found at:

https://guide.freddiemac.com/app/guide/bulletin/2021-38

The Fannie Mae Bulletin can be found at:

https://singlefamily.fanniemae.com/media/29411/display

Each association will need to coordinate completion of the Freddie Mac and Fannie Mae questionnaires with its board members, manager, and, importantly, the association’s attorney. Practically speaking, the questionnaires will need to be updated as the scenario at your association changes. Just because an association is not eligible this year does not mean circumstances will not change leading to a later acceptance. As to the costs associated with the completion of the questionnaires (and while arguments may exist for the buyer who caused the need for the completion of the questionnaire to pay for it), since the questionnaire benefits the entire association by providing for a viable market for all new purchasers to acquire loans to purchase a unit, the expense should be deemed a common expense shared by all members of the association.

Be sure to reach out to your association’s attorney to answer any questions you may have regarding Fannie Mae and Freddie Mac questionnaires and their local lender requirements because, remember, if Fannie Mae or Freddie Mac will not buy the loan from the local lender, the lender is not likely to make the loan.

Reprinted with permission from the March 2022 issue of the Florida Community Association Journal.

February 11, 2022March 24, 2022

Will The Association’s Denial Of An Architectural Request Withstand Challenge? | Many Won’t – Find Out Why

Will The Association’s Denial Of An Architectural Request Withstand Challenge? Many Won’t—Find Out Why

February 11, 2022

For many homeowners associations, a top priority is ensuring that the homes in the community are maintained in conformity with the “community-wide standard.” But, what is this subjective standard? How is compliance measured? What is the process to be judged when a request to the association’s architectural review committee (ARC) is made? The ARC is instrumental in ensuring that the community-wide standard is met. However, your association may run into a problem if the ARC denies a request from a homeowner if the association has not adopted specific, objective criteria and guidelines on which the ARC can rely.

Sometimes applications to the ARC are denied because the proposed modifications were not “in harmony” with the other homes in the community or did not conform with the “community-wide standard.” However, such a limitation is vague, and a denial based on whether a particular modification is “harmonious” is subjective. Thus, the members are entitled to specific guidelines regarding what is allowed and what is not allowed, and in fact, this is required by law.

The association’s ARC can only be as effective as the objective guidelines and standards drafted into the declaration and board-adopted rules. If your ARC is relying on aesthetics or other subjective criteria that are simply “personal preferences” rather than written, adopted, and published objective standards and guidelines, any disapproval is vulnerable to a successful challenge. In fact, in the seminal case regarding approval of architectural modifications, Young v. Tortoise Island Homeowner’s Ass’n, Inc., 511 So.2d 381 (Fla. 5th DCA 1987), the court held that where the governing documents were silent as to the modification at issue, a denial could not be based on the architectural control board’s opinion regarding “aesthetics, harmony and balance—admittedly very personal and vague concepts.”

In Young, the owners submitted an application to build a flat roof on their home. The homes immediately surrounding the home were all peaked roofs. Nothing in the governing documents prohibited an owner from building a flat roof, and the requested roof complied with all of the specific requirements set out in the governing documents. However, the architectural control board denied the owners’ request because there was a “very strong feeling” that the flat roof would not be “architecturally compatible with the other homes.” In the end, the Youngs built the flat roof despite the association’s disapproval, arguing that the architectural control board had no authority to impose a prohibition against flat roofs. The court agreed with the Youngs, holding that

“In the absence of an existing pattern or scheme of type of architecture which puts a prospective purchaser on notice that only one kind of style is allowed, either in the recorded restrictions or de facto from the unified building scheme built on the subdivision, such a board does not have the power or discretion to impose only one style over another based purely on ‘aesthetic concepts.’”

The flat roof violated no recorded restrictions, no objective rule adopted by the association, and no de facto common existing building style in the community. Therefore, the court held that it was beyond the power of the architectural review board to prohibit the flat roof.

The concept in Young was further codified in 2007 in §720.3035(1), Florida Statutes, which provides that an association or the ARC has the authority to review and approve plans and specifications only to the extent that the authority is specifically stated or reasonably inferred as to location, size, type, or appearance in the declaration or other published guidelines and standards. More specifically §720.3035(1), Florida Statutes, provides that the authority of an association or any architectural, construction improvement, or other such similar committee of an association to review and approve plans and specifications for the location, size, type, or appearance of any structure or other improvement on a parcel, or to enforce standards for the external appearance of any structure or improvement located on a parcel, shall be permitted only to the extent that the authority is specifically stated or reasonably inferred as to such location, size, type, or appearance in the declaration of covenants or other published guidelines and standards authorized by the declaration of covenants.

In other words, the ARC can only approve or deny requested modifications based on objective standards with specificity as to location, size, type, or appearance that are set out in the declaration or other published guidelines and standards. Without specific, objective standards to rely upon, the ARC is at risk of making arbitrary decisions regarding approval. Basing ARC denials on concepts like “aesthetics, harmony, and balance” will land the association in hot water if an owner challenges such denial. It is far safer to base approval or denial on objective standards as set out in the declaration or as adopted by the board.

Creative drafting by an association’s attorney is critical in order to capture those ARC applications where a member may request a modification that is not squarely addressed by the governing documents. In plain English, a “catchall” amendment to the declaration can be artfully drafted that stands for the proposition that, if such a request is made, then the existing state of the community is the applicable standard by which the application is to be judged. For example, if the Tortoise Island Homeowner’s Association had had such a provision in its declaration, then given that there were no flat roofs in the community, the existing state of the community may have provided a lawful basis for the ARC to deny the request, thus possibly leading to a whole different result in the case.

On a related note, there are strict procedural requirements that your association must follow, most especially if the ARC intends to deny an ARC request. It is likely many ARCs do not conduct their activities in conformity with Florida law such that a denial could withstand judicial scrutiny. Pursuant to §720.303(2), Florida Statutes, a meeting of the ARC is required to be open and noticed in the same manner as a board meeting. In other words, notice of the ARC meeting must be posted in a conspicuous place in the community at least 48 hours in advance of the meeting, and the meeting must be open for the members to attend. In addition, pursuant to §720.303(2)(c)3., members of the ARC are not permitted to vote by proxy or secret ballot. Bare bone minutes should be taken as well to create a record of ARC committee decisions, most especially denials.

We hear from many associations that the ARC does not meet openly or notice their meetings. This leaves any decision made by the ARC vulnerable to challenge. If the ARC denies an application but fails to do so at a properly noticed meeting, the owner can challenge the denial claiming that it is not valid as the ARC did not follow proper procedures. Many declarations contain language which provides that if an ARC application is not approved or denied within a certain period of time, the application is deemed approved. In that case, if the ARC’s denial of an application is not valid because the ARC failed to comply with the procedural requirements for the meeting, an application which violates the declaration or the ARC standards may be deemed approved by operation of the declaration! By complying with the provisions of Chapter 720, Florida Statues, your association can avoid that disaster.

Practice tip: Remember that notice of any board meeting at which the board will consider a rule which restricts what an owner can do on their parcel must be mailed, delivered, or electronically transmitted to the members and posted conspicuously on the property not less than 14 days before the meeting.

If your association has not adopted objective ARC standards and guidelines including the “catchall” provision discussed above, now is the time to start! We recommend that you contact your association’s counsel prior to drafting such rules to ensure that the association is in compliance with the requirements of the governing documents and Chapter 720, Florida Statutes.

January 17, 2022March 24, 2022

Securing Your Gated Community | Exactly Who Is Allowed In?

While living in a gated community can add peace of mind for the residents who live behind the gates, there are many important considerations for the association when crafting rules and regulations regarding who may and who may not be permitted to enter the community. In today’s gated communities, there are three entry control options: (i) live personnel to monitor the gate, (ii) a virtual gate guard where the gate guard who allows guests to pass through is off-site and monitoring electronically, or (iii) a simple call box.

Many associations adopt rules which require visitors to the community to present valid identification to ensure that the visitors are authorized by the association or a resident to enter the community. But, what kind of identification can an association require? Are there limits? In the end, the association must balance its interest in ensuring that only authorized visitors enter the community with the rights of the owners and the visitors entering the community.

One question which bears analysis is, is the association permitted to “swipe” a driver license? Section 322.143, Fla. Stat. (2021), defines “swiping” a driver license as the act of passing a driver license or identification card through a device that is “capable of deciphering, in an electronically readable format, the information electronically encoded in a magnetic strip or bar code on the driver license or identification.”

Pursuant to §322.143, Fla. Stat. (2021), a private entity is not permitted to “swipe” an individual’s driver license or identification card to capture and store information contained in the magnetic strip unless the individual consents to allow this, and the association informs the individual what information will be collected and the purpose or purposes for which it will be used. However, an exception exists in that the association is allowed to “swipe” the driver license to verify the authenticity of the driver license, as long as the association is not capturing and storing the information on the magnetic strip. More specifically, §322.143(2)(a), Fla. Stat. (2021), provides, in pertinent part, the following:

(2) Except as provided in subsection (6), a private entity may not swipe an individual’s driver license or identification card, except for the following purposes:

(a) To verify the authenticity of a driver license or identification card or to verify the identity of the individual if the individual pays for a good or service with a method other than cash, returns an item, or requests a refund.

In accordance with the foregoing, an association is permitted to “swipe” a driver license but is not permitted to store, sell, or share the personal information collected from swiping the driver license. Although swiping without storing the information is permitted, this author recommends that the association fully avoid swiping the driver license. If the information was inadvertently or even temporarily stored on the device that the association used to swipe the driver license, the association would be in violation of this statute. Note that manually collecting personal information or making a photocopy or other copy of the front of the driver license is not prohibited by the statute and is a far safer practice.

Another question worth addressing is, can the association require a valid United States driver license for any drivers entering the community? Be warned, such a requirement could land the association in hot water. Although the association can likely require any driver entering the community to have a valid driver license, the association cannot require that the license be issued in the United States.

Pursuant to §322.04(1), Fla. Stat. (2021), “a nonresident who is at least 16 years of age and who has in his or her immediate possession a valid noncommercial driver license issued to the nonresident in his or her home state or country” is permitted to operate a vehicle without a Florida license. In other words, a driver with a proper license in another state or another country is legally permitted to drive in Florida as long as they have their valid noncommercial driver license in their possession. Similarly, an association should accept a valid license issued from another state or country for entry into the community.

If the above is not enough to encourage your associations to accept driver licenses from all countries and states, consider that a policy requiring a driver license issued in the United States may be considered a violation of the Fair Housing Act in that doing so may be deemed discrimination based upon national origin and may form the basis of a discrimination lawsuit based on disparate treatment or disparate impact. “Disparate treatment” is an intentional form of discrimination, whereas “disparate impact” discrimination occurs when a policy has an unintentional negative effect on members of a protected class. Thus, while this author is not aware of any such appellate decisions issued in the State of Florida, the last thing any association needs is to be the first defendant in such a Fair Housing Act lawsuit.

With regard to all rules adopted by the board of the association, rules regarding who can enter the community are only enforceable if they are within the board’s scope of authority and are reasonable for the purpose. If a rule is outside the board’s scope of authority as set out in the governing documents of the association, or if the rule represents arbitrary or capricious decision-making, such rule will not be enforceable. When adopting rules, remember the following:

The board or the body making the rule must have authority from the governing documents or statute to adopt the rule.
The rule cannot conflict with any rights afforded by documents of higher priority, whether express or implied rights.
The rule must be reasonable. Reasonableness is hard to define, but the case law provides that the rule must be rationally related to a legitimate association objective. The rule cannot be wholly arbitrary or capricious.
The rule cannot contravene any law or compelling public policies.
The rule must be adopted in a procedurally correct manner, which includes proper notice.

On a different note, remember that material alterations to the gate area may require a vote of the membership.

In regard to official records and as to homeowners associations, §720.303(5)(c), Fla. Stat. (2021), provides, in relevant part, that although part of the official records of the association, “[i]nformation an association obtains in a gated community in connection with guests’ visits to parcel owners or community residents” are not accessible to members.

As is evident from this discussion, there are many different issues to take into consideration when drafting rules governing who is permitted in your community. To ensure that your rules comply with Florida law, we recommend that the association have its counsel review any rules prior to their adoption.

July 8, 2021July 8, 2021

NBC NEWS Reports Condo Could Have Been Repaired Faster Under Prior Law | July 7th Building Maintenance Video Now Online

The Champlain Towers South collapse is a heartbreaking tragedy. While it may be months before the cause or causes of the collpase are determined, NBC News reporters Jon Schuppe and Phil Prazan look back at Florida’s laws governing condominium associations to determine if they could have made a meaningful difference. KBR attorney Jeffrey Rembaum provides input for this NBC Report.

Click Here to read this important article (“Collapsed Florida Tower Could Have Been Repaired Faster Under Repealed Law, Experts Say” | by Jon Schuppe and Phil Prazan, NBC News | published July 8, 2021).

Click anywhere on the image below to view our July 7th webinar: