Author: trisha

Until not too long ago, if an investor or foreclosing lender acquired seven or more condominium units, there was limited legal authority from the Florida Division of Condominiums to hold that person or company in the shoes of the original developer for all of the construction defect liability and failed financial obligations. Then, along came the 2007 financial crash. Failed condominium projects were everywhere and sophisticated investors knew not to buy seven or more units for fear of tremendous liability for acts in which the investor did not at all participate. Enter, Part VII of the Condominium Act, Chapter 718, Florida Statutes … to the rescue.

In 2010, to solve this crisis, Part VII of the Condominium Act, was passed into law. It is appropriately titled, the “Distressed Condominium Relief Act”.  In short, the “Relief Act” allows a mechanism for investors to acquire failed condominium projects and then sell the units at arms length without acquiring the liability of the failed developer for any construction defects and/or assessment funding obligations of the failed developer. However, the acquirer of these bulk units is only labile for their own construction activities. There are even safe guards built into the Relief Act to protect against using it improperly as a shield against liability by prohibiting the bulk transferee from being related to the failed developer.

Before the Relief Act was enacted, and forgetting the “robo-signing” debacle that led to the lender foreclosure delays of an extreme magnitude, lenders were very reluctant to foreclose their failed condominium projects due to their inherent financial liability for construction defects and prior developer funding obligations. But, with the Relief Act springing into law, commerce resumed as failed condominium projects were taken over by sophisticated investors, and lenders saw fit to safely foreclose. Importantly, investors and lenders felt safe to acquire more than seven units from the failed condominium project.

AND THEN…

On February 27, 2013, in The Porto Venezia Condominium Association, Inc., v. WB Fort Lauderdale, the United States District Court for the Southern District of Florida held that a lender who loaned millions of dollars to a developer for construction of  a condominium project and who accepted a deed in lieu of foreclosure for the now built, but unsold condominium units, could be liable to purchasers for what are commonly referred to as the Chapter 718.203, Florida Statutes, “statutory implied warranties of habitability” that form the basis of the cause of action against developers for construction defects arising from the original construction of the condominium.  In short, the Southern District Court held that “WB” as the successor to the initial lender, “ING Direct, FSB”, was still a “developer” and, as such, could be liable for the activities of the original developer during the forthcoming trial brought by The Porto Venezia Condominium Association.

Interestingly, the trial court had held that WB was not liable as a lender-developer and had held that, “having engaged in no construction itself, it could not be liable for construction defects.” The trial court had also found that, “WB could not be liable under the Florida Building Code because it had not engaged in any construction.” As for negligence, the trial court found that, “because all construction had been completed, WB did not breach any duty, even duties that could arise if a lender took an active part in developing a construction project.” However, in overturning the trial court, the Southern District Court held that, “because the Florida Legislature crafted a broad definition of “developer” that captures both builder-developers and lender-developers, the Court should not have cut away statutory obligations that ride along with entities meeting that definition.” Even the Southern District Court admitted that “it is peculiar to make a lender a guarantor of the construction of others, because Florida law elsewhere is clear that such liability is inappropriate.”

So what does all this mean? It could mean that the Relief Act was not considered as a part of the Southern District Court’s analysis because it did not exist at the time the loan was made and still did not exist when WB took title as a result of its acceptance of a deed in lieu of foreclosure. It could also mean that, because the Southern District Court did not address the lack of applicability of the Relief Act in its written opinion, the WB case could again frighten lenders from lending on new projects and foreclosing failed condominium projects due to the lack of clarity in regard to the lender’s financial liability upon foreclosure of the condominium project. Perhaps the Florida Legislature will see fit to clarify the applicability of the Relief Act to encourage future lending practices.

House Bill 73 and House Bill 7119 were signed into law and will become the law of the land on July 1, 2013.  Let’s take a look at a few highlights of this legislation.

Official Records. A condominium and homeowners’ association shall allow a member, or his or her authorized representative, to use a portable device, including a smart phone, tablet, portable scanner, or any other technology capable of scanning or taking photographs, to make an electronic copy of the official records in lieu of the association’s providing the member, or his or her authorized representative, with a copy of such records. The association may not charge a member, or his or her authorized representative, for the use of a portable device.

Member Directories. A condominium and homeowners’ association may print and distribute, to parcel owners, a directory containing the name, parcel address, and telephone number of each parcel owner. However, an owner may exclude his or her telephone number from the directory by requesting in writing to the association.

Board Member Certification Requirements.  Similar to the already existing condominium board member certification requirements, within 90 days after being elected or appointed to the board, all cooperative and homeowners’ association board members must either 1) submit a certificate of having satisfactorily completed the educational curriculum administered by a division-approved education provider within 1 year before, or 90 days after, the date of election or appointment OR 2) certify in writing to the secretary of the association that he or she has read the association’s declaration of covenants, articles of incorporation, bylaws, and current written rules and policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members. The written certification or educational certificate is valid for the uninterrupted tenure of the director on the board. A director who does not timely file the written certification or educational certificate shall be suspended from the board until he or she complies with the requirement. The board may temporarily fill the vacancy during the period of suspension.

Election Challenges. Any condominium or homeowners’ association election challenge must be filed within 60 days of the date of the election or the challenge is forever time barred. On the other hand, no recall of an existing board member may be conducted during the first 60 days of the board member’s service on the board.  

HOA Amendments. Within 30 days after recording an amendment to a homeowners’ association’s governing documents, the association must provide copies of the amendment to the homeowners’ association’s members.

Member’s Right to Speak at HOA Members Meeting. The requirement that a member provide advance written notice to exercise their right to speak on all items on the agenda was deleted. Therefore, notwithstanding any provision to the contrary in the governing documents, or any rules adopted by the board or by the membership, a member and a parcel owner have the right to speak for at least 3 minutes on any item.

HOA Budgets. If reserve accounts are established by the developer, the budget must designate the components for which the reserve accounts may be used.

Financial Reporting for Homeowners’ and Condominium Associations. The threshold dollar values have changed. Total revenue of $100,000 $150,000 or more, but less than $200,000 $300,000, requires the association to prepare compiled financial statements.

Total revenue of $200,000 $300,000 or more, but less than $400,000 $500,000, requires the association to prepare reviewed financial statements.

Total revenue of $400,000 $500,000 or more, requires the association to prepare audited financial statements.

Total revenue of less than $100,000 $150,000, the association shall prepare a report of cash receipts.

An association that operates fewer than 75 50 units, regardless of the association’s annual revenue, shall prepare a report of cash receipts and expenditures in lieu of financial statements (as set out above).

Staggered Terms for Condominium Board Members. Reference to staggered terms and requirements for unit owner approval was deleted from The Condominium Act and replaced with the following, “If a condominium association’s bylaws or articles of incorporation permit terms of no more than two years the association board members may serve two year terms.”

Condominium Association Hurricane Protection. The Condominium Act was amended to include impact glass, code-compliant windows or doors, or other types of code-compliant hurricane protection meaning that a unit owner who has installed other types of code-compliant hurricane protection that comply with the current applicable building code is entitled to receive a credit when the same type of other code-compliant hurricane protection is installed, and the credit shall be equal to the pro-rata portion of the assessed installation cost assigned to each unit.

 

Manager Liability. A new law was created that provides for disciplinary measures if a manager violates any provision of Chapter 718, Chapter 719, or Chapter 720 during the course of performing community association management services pursuant to a contract with a community association.

On June 7, Governor Scott signed House Bill 87 commonly referred to as the “Foreclosure Bill” or “HB 87” into law. As a result, so long as none of the defendants in the case raise a defense to the lender’s foreclosure, any of the parties can move the court for an “order to show cause for entry of final judgment of foreclosure.” This step obviates the need for further hearings such as the motion for summary judgment and orders the clerk to set a sale date. If all goes according to plan, these new laws will be of great benefit to condominium, homeowners’, cooperative, and commercial associations as they will shave months and months from the otherwise languishing foreclosure process.  However, when property is erroneously foreclosed, there is little hope for the homeowner to set aside the foreclosure and regain title to their property. At best, the homeowner in that situation can recover monetary damages but not their home. YOUCH! HB 87 became effective on the day Governor Scott signed it into law, June 7, 2013.

Not often mentioned in the news is Senate Bill 342 (“SB 342”). It was signed into law by Governor Scott on May 30, and provides that homesteaded property can be rented for as long as 30 days per calendar year without being in danger of losing a previously filed homestead exemption on the property.  If the homesteaded property is rented for more than 30 days, then the owner is in great danger of losing their homestead exemption.  SB 342 becomes law on July 1.

If you have been thinking about installing a solar pool heater or other renewable energy source device, there is new benefit thanks to House Bill 277 (“HB 277”) which the Governor also signed on May 30. HB 277 acts to ensure that the appraised property tax value of your property cannot increase due to the installation of such equipment.

Have you heard about House Bill 999 (“HB 999”)? Boat owners and marina developer- operators surely have! This legislation provides great incentive for the latter group to lease state submerged lands at a lease rate to be deemed fair by the Board of Governors, which fully waives the need for competitive bid. The legislation also provides a 30% discount to the lessee/marina owner-operator if they advertise their boat slip availability to the general public reciting in the ad, “first come, first serve.”

The general public could really benefit from the legislation by way of many more affordable and leasable boat slips. But, there is a catch. For the marina owner to qualify for the 30% discount off the State’s annual sovereign land lease rate, the marina owner, leasing the marina’s land from the State, can only offer boat slip leases to the general public with a maximum term of 12 months. Also, the lease between the marina owner and the boat owner must not include any auto renewal terms. This means that boat slip lessees must remember to sign a new lease each year.  This requirement will help ensure the boat slips remain in active use.

HB 999 also provides residential homeowners whose land borders “sovereign lands” what amounts to a no fee “use right” to build a maximum of four boat slips behind their single family home. In addition, owners in a multi-family development that has “multi-family docks” are not required to pay lease fees for a “preempted area” equal to or less than 10 times the shoreline times the number of units with docks in the multifamily development.  This one almost sounds too good to be true, we’ll see…

Meanwhile, expansive community association House Bill 73 is just waiting to be presented to the Governor. Upon becoming law, it will provide that, amongst many other changes, homeowner association board members must complete certification requirements similar to what is already in effect for condominium association board members and provides association owners the right to use their own electronic portable devices to make copies of the association’s official records. Senate Bill 120, also waiting to be presented to the Governor, will create a new type of condominium regime for “condos in a condo” through creation of some new concepts including “primary condominiums” and “secondary condominiums,” along with the requisite primary and secondary condominium associations necessary to operate them.

Automated external defibrillators (“AED”) are portable medical equipment that deliver an electrical impulse to the heart to disrupt and hopefully correct an otherwise fatal irregular heart beat. AEDs are designed for easy use and are credited with saving countless lives. The “Cardiac Arrest Survival Act” is codified in s. 768.1325, Florida Statutes. It answers many serious questions regarding the liability associated with ownership of these little life-saving gems.

Simply put, the laws governing AEDs were designed to encourage consumer purchase, placement and use of AEDs by shielding the AED’s owner and operator from liability, so long as the most minimum of requirements are followed. The rules are simple… here we go….

RULE 1: Any person who uses or attempts to use an automated external defibrillator device on a victim of a perceived medical emergency, without objection of the victim of the perceived medical emergency, is immune from civil liability for any harm resulting from the use or attempted use of such device (with a couple of exceptions, explained below.)

RULE 2: Notwithstanding any other provision of law to the contrary, (and with little exception as discussed below), any person who acquires the device and makes it available for use, including, but not limited to, a community association organized under chapter 617, chapter 718, chapter 719, chapter 720, chapter 721, or chapter 723, is immune from such liability, if the harm was not:

a) due to the failure of such person to properly maintain and test the device; OR

b) due to the failure of providing appropriate training in the use of the device to an employee or agent of the acquirer when the employee or agent was the person who used the device on the victim, except that such requirement of training does not apply if:

1. The device is equipped with audible, visual, or written instructions on its use, including any such visual or written instructions posted on or adjacent to the device; OR

2. The employee or agent was not an employee or agent who would have been reasonably expected to use the device; OR

3. The period of time elapsing between the engagement of the person as an employee or agent and the occurrence of the harm, or between the acquisition of the device and the occurrence of the harm in any case in which the device was acquired after engagement of the employee or agent, was not a reasonably sufficient period in which to provide the training.

RULE 3:  The immunity described above does not apply to a person if:

(a) the harm involved was caused by that person’s willful or criminal misconduct, gross negligence, reckless disregard or misconduct, or a conscious, flagrant indifference to the rights or safety of the victim who was harmed; OR

(b) the person is a licensed or certified health professional who used the automated external defibrillator device while acting within the scope of the license or certification of the professional and within the scope of the employment or agency of the professional;

Additionally, there is no requirement to place the AED at any particular location, and there is no requirement to have an employee trained to operate the AED on the premises.

A strict and literal interpretation of these laws means that when an association installs the AED and includes the “how to” instructions with the device and properly maintains and tests the device, the association should be immune from liability. Notably, an insurer cannot exclude damages resulting from the use of an AED from coverage under a general liability policy issued to the community association. Nevertheless, it is still a good idea to discuss the decision to purchase an AED with the association’s insurance agent.  The association could consider offering classes taught by the requisite professional in the use of the AED, too.

With all of this information in mind, if the association acquires an AED, let folks know where it is kept. If the AED is going to be brought from location to location, say from the clubhouse to the golf course during a golf event, then there should be clear policies governing such activities so that everyone can easily find the AED, if needed. For example, if the AED is taken from its usual location for better proximity to a special event, then a brightly colored notice could be left in the AED’s regular location to let others know where to find it. Finally, common sense dictates that at least one person should be trained in its use, and responsible for the AED’s maintenance and testing schedule.

Save a life!

In response to the continuing foreclosure logjam, the 2013 Florida Legislature passed House Bill 87 (“HB 87”). While it remains to be seen whether HB 87 will become LAW, it provides clear procedures for a lender to follow when trying to foreclose property where the lender cannot locate the original paperwork, including, most importantly, the original note signed by the borrower.  The stated purpose of HB 87 is to “expedite the foreclosure process by ensuring initial disclosure of a plaintiff’s status and the facts supporting that status, thereby ensuring the availability of documents necessary to the prosecution of the case.”

Those against HB 87 argue that it further erodes both Federal and State Constitutional protections that prevent government from enacting laws that impair substantive contractual rights.  Those in favor of HB 87 argue that its remedies create new procedures that will alleviate an already over-burdened judicial process of foreclosure.  The gravamen of this issue will likely turn on the newly created requirement that, as a pre-requisite to raising any defense, a foreclosure defendant is first required to deposit the alleged monetary shortfall into the registry of the court.  Those against HB 87 might argue that such a requirement can lead to extreme abuse. For example, what happens if an unscrupulous lender alleges an amount not lawfully due? According to HB 87, the defendant must still deposit the monetary shortfall into the court registry to be in a position to contest the lender’s false allegations.

By way of background, on May 12, 2013, the Palm Beach Post reported that, in 2012, there were 186,651 new foreclosure cases filed in Florida and another 156,069 foreclosure cases were “re-opened”. Included in those figures are Palm Beach County’s foreclosure filings where 13,500 new foreclosure cases were filed, while another 13,389 cases were re-opened.

A judicial workgroup found that almost thirty percent of Palm Beach County’s pending foreclosure cases are at least three years old, and more than fifty-one percent have been on-going for two or more years as compared to the rest of the State, where only forty-two percent of foreclosure cases have been pending for greater than two years. This is compared against non-foreclosure litigation matters where the average jury trial case takes approximately eighteen months and non-jury cases take around twelve months to reach closure.  Considering that foreclosure cases are routinely disposed of by the court in non-jury settings, the judicial workgroup’s findings are even more alarming.

The workgroup, according to the Palm Beach Post, explained that the court has limited power over two barriers that prevent the cases from moving faster. The first is that the courts have limited power to force the foreclosing bank to move their case along, and the second has a lot to do with the lender’s lost paperwork and other procedural problems.

HB 87 also provides that, in a legal proceeding to set aside, invalidate, or challenge the validity of a final judgment of foreclosure of a mortgage or to establish or reestablish a lien or encumbrance on the property in abrogation of the final judgment of foreclosure of a mortgage, the court shall treat such request solely as a claim for monetary damages and may not grant relief that adversely affects the quality or character of the title to the property.

Amongst its many other provisions, HB 87 also provides that the Florida “Supreme Court is requested to amend the Florida Rules of Civil Procedure to provide expedited foreclosure proceedings in conformity with this act and is requested to develop and publish forms for use in such expedited proceedings.”

A few years back, lawyers representing community associations sought and found relief against the banks’ delays by invoking the trial court’s equitable remedies. For a few months, it seemed there might be a few judicially crafted remedies that could be used against stalling lenders. However, the lenders appealed the trial court’s exercise of its equitable powers. It did not take long for the State’s appellate courts to rule that, where legal remedy existed, trial courts were not free to exercise equitable relief.  As a result, tens of thousands of foreclosure cases continue to stall.

We will all know soon enough if the Governor will veto HB 87, sign it into law, or do nothing at all, which, ultimately, has the same effect as signing the Bill. As long as the Governor doesn’t veto it, House Bill 87 becomes law on July 1, 2013.  If you feel strongly one way or the other, please email the Governor and share your thoughts, “for” or “against”.

Citizens Insurance Company, known as the insurer of last resort, lawfully escaped providing coverage for what, at least one condominium association believed, was properly insured property under the association’s casualty policy. Just weeks after the Third “District Court of Appeals” (the “DCA”) ruled, in the Aventura case,  that third party bidders do not have to pay assessment arrearages in response to a first mortgage foreclosure where an association has first acquired title to the unit by foreclosing its own assessment lien, the Fourth DCA just reversed a trial court’s decision where the trial court had decided that Citizens needed to provide coverage in favor of the association for “all property located outside the unit and all portions for which the declaration of condominium required coverage.”

On April 10, 2013, the Fourth DCA, in Citizens Property Insurance Corporation v. River Manor Condominium Association, Inc., held that merely because the Association’s insurance policies contained a provision requiring that the policy be amended “to conform to any conflicting statutes of the State where the property is located” did not mean that Citizens was required to provide such coverage as required by the 2005 version of section 718.111(11), of the Florida Condominium Act.

In this case, Citizens agreed to pay the insured, River Manor Condominium Association, Inc., only for those specific items set out in the policy, but not for the additional items as set out in section 718.111(11), Florida Statutes, which, in 2005, provided:

“Insurers issue insurance policies for all portions of the condominium property located outside the unit, and all portions of the condominium property for which the declaration of condominium requires coverage provided by the association.”

The River Manor Condominium Association, Inc. argued that application of section 718.111(11), Florida Statutes, to the plain meaning of their Citizens insurance policy meant that Citizens was obligated to insure every part of the condominium as required by the 2005 statute. The trial court agreed and granted “summary judgment” (no material fact at issue and the moving party is entitled to judgment as a matter of law) in favor of the Association. However, the Fourth DCA held that the text at issue in the insurance policy did NOT create any obligations on Citizens to provide such coverage as set in section 718.111(11).

Because the issue under consideration by the Fourth DCA invoked a matter of statutory interpretation, its level of review was, what lawyers refer to as, “de novo.” This type of review allows the appellate court to review the entire lower court record anew, as if it were the first time all over again. The result being that the appellate court can substitute its judgment for that of the lower court, and that is exactly what they did!

The moral of this horrible tale is quite simple. Even though today’s version of section 718.11(11), Florida Statutes, pertaining to this issue is very different, if your association’s insurance policy has a clause similar to the clause in River Manor’s policy, then in all probability your association might not have the coverage you think it does.  It’s a good time to review your community association’s insurance policy with the association’s insurance agent or attorney.

For contrast, the current version of section 718.11(11), of the Condominium Act, provides, in relevant part, that:

(f)  Every property insurance policy issued or renewed on or after January 1, 2009, for the purpose of protecting the condominium must provide primary coverage for:

1. All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications. 
2. All alterations or additions made to the condominium property or association property pursuant to s. 718.113(2). 
3. The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.

Since the River Manor court also held that “the Condominium Act regulated condominiums, – not insurance companies,” if your association’s insurance policy does not mirror the current version of section 718.11(11), and/or contains language similar to the text contained in the River Manor policy (regarding “conforming the policy to existing law”), then the association needs to address the situation sooner than later…. now.

Can an amendment to a homeowners’ association’s declaration of covenants (or “declaration of condominium” for all of you condo dwellers) go too far? Is there a “line in the sand” that cannot be crossed when amending the governing documents? Can an amendment be so noxious that, even if properly adopted, a court will strike it down?  Well, the answer depends…

In testing the boundaries of an amendment, the gravamen question is this: who passed the amendment? Was it the owner controlled association that voted in favor of it, or was the amendment enacted by a developer’s unilateral power to amend the declaration during the period of developer control?

Generally speaking, a community has a wide berth to adopt amendments, desired by the members, when it is the members themselves who vote in favor of the change.  For example, in 1976, in Seagate Condominium Ass’n, Inc. v. Duffy, the Fourth District Court of Appeal upheld a vote of the owners amending their declaration of condominium prohibiting leasing of any units, except for limited periods in cases of hardship. The Court also ruled that the amendment was retroactive in that it even applied to owners who purchased their units before the amendment was adopted. As often repeated, and as initially penned in 1981 by the Fourth District Court of Appeal in Hidden Harbour Estates, Inc. v. Basso, courts recognize that restrictions found in a declaration “are clothed with a very strong presumption of validity which arises from the fact that each individual unit owner purchases his unit knowing of and accepting the restrictions to be imposed.” This includes the possibility that the members may vote to change things up from time to time. Thus, there is broad authority for a member controlled community association to vote in favor of amending, deleting, or even adding new restrictions. Think of it this way… When you choose to live in a community association governed by a declaration, you know (or you should by now know) that you’re giving up a certain sense of control in that the “majority rules.”

Is a developer’s unilaterally adopted amendment provided the same “presumption of validity” similar to an amendment adopted by the owners? Generally, even unilateral developer amendments are given a broad berth of presumptive validity, too. Nevertheless, there are times when the courts have held that a developer’s unilaterally adopted amendment to a declaration goes too far. Most especially, this occurs when the developer’s amendment changes the “general scheme of the community.” For example, in 2009, in Ironhorse v. Chismark, just before turnover, the developer adopted a unilateral amendment to the HOA declaration. The amendment required membership in a country club where such membership was previously voluntary. Requiring the HOA members to join the country club through a unilateral developer’s amendment to the declaration was struck down by the Fourth District Court of Appeal because such a requirement changed the “general scheme of the community.” In a very recent 2013 case, Flescher v. Oak Run Associates, the Fifth District Court of Appeals struck down a developer’s unilateral amendment to the community’s declaration that would have permitted the developer to pocket any surplus leftover from the members’ dues.

On the one hand, a developer has a right to amend the restrictive covenants so long as such right is reserved and change is reasonable. On the other hand, the developer’s power to amend must be exercised in a reasonable manner so as to not destroy the “general scheme of the community.”   The bottom line is this: while a unilateral developer enacted amendment may disappoint a homeowner’s expectations, if it does not change the general character of the community or the burdens between the grantor and grantee, then the amendment is likely to withstand judicial challenge.  Amendments properly and lawfully adopted by the members are even more likely to withstand judicial challenge.

The Informational Estoppel 

Often times, buyers of residential properties request certain information from the community association where the property is situated. While there is no obligation to provide anything other than the documents required by law, such as the financial estoppel and, the often looked, Question and Answer Sheet, a good reason to respond to such requests is to help facilitate lot and unit sales, especially in light of the fact that the requesting party needs to pay for such information. While not the subject of today’s column, the Question and Answer Sheet provides basic information regarding the community, such as general and special assessments and rules regarding unit use, etc.

Sections 720.303(5)(d) and 718.111(12)(e)(1), Florida Statutes, provide that homeowners associations and condominium associations, respectively, or their authorized agent, may charge a reasonable fee to the prospective purchaser,  lienholder, the current parcel owner, or member, for providing good faith responses to requests for information by, or on behalf of, a prospective purchaser or lienholder, other than that required by law, so long as the fee does not exceed $150.00 plus the reasonable cost of photocopying and any attorney’s fees incurred by the association in connection with the response.

Pursuant to Section 718.111(12)(e)(2), Florida Statutes, a condominium association and its authorized agent are not liable for providing such information in good faith pursuant to a written request if the person providing the informational estoppel includes a written statement in substantially the following form: “The responses herein are made in good faith and to the best of my ability as to their accuracy.” Sadly, parallel protection does not exist in Chapter 720.

The Financial Estoppel

The financial estoppel is required by law to be provided by a community association, or their agent, to a perspective purchaser.  Pursuant to Sections 718.116 and 720.3085,1 Florida Statutes, the financial estoppel must be provided by both condominium associations and homeowners associations, respectively, within 15 days after the date on which a request for an estoppel certificate is received from a parcel owner or mortgagee, or his or her designee. It must be signed by an officer or authorized agent of the association.

The certificate must disclose all assessments and other monies owed to the association with respect to the HOA parcel or condominium unit.  An association, or its agent issuing the estoppel, may charge a fee for the preparation of such certificate. The fee must be included in the certificate, and is payable upon the preparation of the certificate. However, for the association or its agent to charge the fee, the authority to do so must be established by a written resolution adopted by the board or provided by a written management, bookkeeping, or maintenance contract.

If the financial estoppel certificate is requested in conjunction with the sale or mortgage of a unit, but the closing does not occur, and no later than 30 days after the closing date for which the certificate was sought, the preparer receives a written request, accompanied by reasonable documentation, that the sale did not occur, from a payor that is not the unit owner, the fee must be refunded to that payor within 30 days after receipt of the request. However, the refund is the obligation of the seller-unit owner, and the association may collect it from the seller-unit owner in the same manner as an assessment (meaning that it is a lien-able expense, if not paid). Persons relying on the financial estoppel certificate receive its benefits and protections, too.

Unlike the informational estoppel, if an association does not provide the financial estoppel within the 15 days provided by statute, a lawsuit can be brought to compel compliance, and the prevailing party is entitled to recover their reasonable attorney’s fees.

Has your association established lawful authority to charge a fee for the financial estoppel?

A few Roundups back we determined that, based on a recent case decided by the 11^th Circuit Court of Appeals, community association managers collecting assessments are not subject to the Federal Fair Debt Collections Practices Act. This week, we visit a different issue that, once again, will be of great interest to community association managers.

In 2006, Florida’s Second District Court of Appeals held that a manager was not liable for an injury where the injured plaintiff claimed the manager was at fault for their injury.  In that case, Greenacre Properties, Inc. v Rao, 933 So. 2d 19 (Fla. 2d DCA 2006), the plaintiff argued i) “that the property management company breached its contract with the . . . homeowners’ association and ii) that the property management company negligently performed its duties under the contract with the Association….”. The court did not agree and held that, “a person who is not a party to a contract cannot sue for a breach of the contract even if the person receives some incidental benefit from the contract… and “nothing in the indirect relationship between an association’s members and the agents [meaning the manager] performing the association’s duties under a written contract … create a fiduciary duty…”.

In a much more recent case, decided March 6, 2013, Pedro v. The Claridges Condominium, Inc., Case no. 4D11-3494, the Fourth District Court of Appeals reviewed “de novo” style whether a trial court properly dismissed a complaint alleged against a manager.  In Pedro, the plaintiffs alleged that the Claridges Condominium association, through its employee property manager, improperly placed, installed, and operated an emergency power generator next to the plaintiffs’ unit. The unit owner plaintiff sued for private nuisance, trespass, and negligence.  The manager moved to dismiss the lawsuit based on the Greenacre decision discussed, above. While the trial court had agreed with the manager’s motion to dismiss the case, the 4^th DCA did not and, as a result, it reversed the trial court’s decision.

By way of background, a Motion to Dismiss, with very few exceptions, must be filed by a defendant and heard by the trial court before the defendant must serve their “answer” to the plaintiff’s complaint. In plain non-legalese English, in Pedro the 4^th DCA’s reversal of the trial court’s decision means that the lawsuit will continue and the defendant is now required to serve their “answer”.

In deciding whether to grant a motion to dismiss, the trial court only looks to the “four corners of the complaint” to determine whether a cause of action against the defendants is properly pled.  In other words, are all of the necessary elements that together create the cause of action present? For example, if the allegation is an unlawful battery, did the plaintiff allege an unlawful touching occurred?  In reviewing a trial court’s final ruling on a defendant’s motion to dismiss, the appellate court employs a method of review referred to as “de novo” (a fancy legal term that means the appellate court can make its own determination as if this were the first time the matter is being decided and then substitute its ruling in place of the trial court’s previous determination).

In the Pedro case, the appellate court looked to four corners of the complaint and determined that all of the elements for each cause of action were set out in the Plaintiff’s complaint.  Therefore, the court found there was “a basis for liability against both the Association and/or the property manager.”

The Pedro complaint, unlike the Greenacre case, did not allege liability based on the contractual relationship between the parties. However, the trial court relied heavily on the Greenacre case in making its determination. It is for that reason the 4^th District Court of Appeals reversed the trial court’s decision. In other words, the trial court mistakenly relied on Greenacre which pertained to a breach of contract situation as contrasted against the allegations of private nuisance, trespass, and negligence alleged in the Pedro lawsuit.

Because the court’s opinion was issued on March 6, there remains time for re-hearing and possibly another appeal. But, in the meantime, the case will remand (another fancy legal term that means “return”) to the trial court where the issues will be heard and liability, if any, decided. So what does all this mean? It means we will have to wait and see if the trial court determines whether a manager has liability for private nuisance, trespass, and negligence when the manager acts as agent for the Association.

In an even more recent trial court case that lasted three weeks, a Palm Beach County trial court found a condominium association 30 percent responsible, its management company 60 percent responsible, and the young bicycle rider 10 percent responsible for an accident that led to that bicycle rider’s death. The theory against the management company was that it failed to undertake proper maintenance and trimming of hedges that were twice the lawfully permitted height.  I’d expect an appeal based on the Greenacre case, but we’ll have to wait and see.