trisha | Rembaum's Association Roundup

March 19, 2012

Tell Ole Pharaoh, Let My People Go!

Almost every year, around this time, I hear “our condominium association won’t let us build a Sukkah, but allows Christmas trees and menorahs. The board is discriminating and I am going to sue!” Before you do that, there are a few things to consider. Let’s start by asking, “What is a Sukkah?”

A Sukkah is a temporary, open roofed structure constructed for use during the week-long Jewish festival of Sukkot celebrating freedom from slaver under Egyptian tyranny. While I personally favor Sukkah’s, and would like to report that they must be permitted, such is not the case. A community association can prohibit the construction of a Sukkah in the common elements by a member provided that i) the board does not arbitrarily deny the member’s request, and ii) the board treats all similar requests in a like manner such that other members cannot place their religious and holiday symbols in the common elements, too.

Is the association’s denial a violation of a member’s First Amendment right to free speech? No, because the First Amendment applies to government action. The association is a private corporation and is not part of government. While an association does not need to comply with the requirements of the First Amendment, it does need to fairly enforce its governing documents. An association’s declaration is a contract that specifies the mutual rights and obligations of the members and the association. It often details the permitted uses in and on the common elements. Restrictions in a declaration are upheld so long as they serve a legitimate purpose and are reasonably applied.

In See Savanna Club Worship Service, Inc. v. Savanna Club Homeowners’ Association, Inc., 456 F.Supp.2d 1223, 1227 (S.D. Fla. 2005), court upheld an association’s prohibition of a worship club holding services in common areas because the association’s rule that prohibited worship services was reasonable in the context of a planned residential community. The court also applied a balancing test of sorts when it noted that the had the worship club been allowed to use the common area auditorium, it would have prevented other members from their right to use the facility.

The board’s standard in reaching its decision of whether or not to approve a member’s request to construct a Sukkah in the common areas is to exercise its reasonable business judgment. So long as the board does so, and there is no evidence of fraud, self-dealing, dishonesty or incompetency, then it would be difficult for a member to successfully challenge such a decision.

An association MUST act fairly and equally towards all members to avoid selective enforcement claims. In other words, if an association allows other members to display their holiday decorations, but denies a member’s request to construct Sukkah, then the association could be subject to claims of discrimination. Therefore, if the request to build the Sukkah is denied, all requests from owners to erect or place any holiday or religious decorations or items in or on the common elements should also be denied. Does this mean that if our association denies a member’s request to build a Sukkah or place other items of religious connotation in the common areas that the association is prohibited from displaying a Christmas tree and menorah? I am glad you asked.

Ignoring the subject of material alterations, the U.S. Supreme Court, held that a Christmas tree, by itself, is not a religious symbol… although Christmas trees once carried religious connotations today they typify the secular celebration of Christmas. In contrast, a menorah was found to have more religious significance. But, when placed next to a Christmas tree, the Court found that the overall effect of the dual display a recognition of both Christmas and Chanukah as part of the same winter holiday season, which has attained secular status in our society. County of Allegheny v. American Civil Liberties Union, Greater Pittsburgh Chapter, 492 U.S. 573 (1989).

So, what are the lessons we can learn from this? Association board’s must treat their members reasonably and fairly when deciding such issues and cannot under any circumstances favor one religious group over another. Christmas trees are clearly permissible subject to counter–arguments pertaining to, perhaps ethereal, material alteration concerns. Menorahs are clearly permissible when placed next to a Christmas tree, but, may or may not be permissible in their absence. Sukkah’s must be allowed if there is a history of board accommodation provided to other religious groups, and can be denied if there is no such history. Of course, you can avoid these issues by building your Sukkah in the backyard (assuming you have one). Practically speaking, since the holiday of Sukkot lasts around one week, by the time anyone complains it is likely the holiday will be over and the Sukkah removed. Nevertheless, if a unit owner demonstrates a flagrant disregard of the governing documents, they could be the subject of a lawsuit for injunctive relief, brought by the board, to ensure such behavior is not repeated.

February 20, 2012September 21, 2015

The Interim Status of House Bill 319

Around this time every year, association boards everywhere want to know how this year’s proposed legislation will affect their association. Me too! The truth is, it is impossible to guess which parts of a proposed bill will actually survive the legislative process.

As far as 2012 is concerned, this year’s legislative bill that most affects community associations is House Bill 319. Since this bill was originally proposed a few short weeks ago, it has undergone five amendments and is now officially labeled “HB 319c2.” The “C2” means that the bill is going through the committee hearing process and may have numerous amendments, or the amendments change the original concept of the bill. In some instances, the bill can be rewritten and a “committee substitute” takes the place of the original. The next committee may again rewrite the bill, and sometimes more than one bill may be combined. The committee’s substitute bill continues to carry the identifying number(s) of the original bill(s) filed. The “c2” designation is a committee substitute for the initial committee substitute. As to HB319, there are too many committee amendments to list them all. Three such amendments that might be of interest follow.

In this latest version of the bill, the author makes what is referred to as a “clarification” (remember, that is the author’s term, not mine) to the amount of assessments a first mortgagee lender owes an association for back assessments after the conclusion of its foreclosure lawsuit. Lawyers have debated this issue for far too long, and clarification is needed. Some say this clarification is too one sided in favor of the lenders…see what you think.

The revised text of this bill provides that, in determining the assessment liability of the first mortgagee who successfully completed their foreclosure, the assessment calculation excludes interest, administrative late fees, attorneys’ fees, or any other fee, cost or expense the came due prior to the lenders’ acquisition of title. The underlined text below is the new language that is being proposed to Section 718.116, Florida Statutes.

“The liability of a first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments, interest, administrative late fees, reasonable costs and attorney fees, and any other fee, cost, or expense incurred in the collection process that became due before the mortgagee’s acquisition of title is limited to the lesser of: Only the unit’s unpaid common expenses and regular periodic assessments that which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or b. One percent of the original mortgage debt…the first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure are NOT liable for any interest, administrative late fee, reasonable cost or attorney fee, or any other fee, cost, or expense that came due prior to its acquisition of title. This subparagraph is intended to clarify existing law.”

Two other proposed changes include election challenges and hurricane preparedness. As to the former, any challenge to the election process must be commenced within 60 days after the election results are announced. As to the latter, the Condominium Act would include code compliant windows, doors, or other types of code-compliant hurricane protection in addition to shutters and impact glass.

February 6, 2012

Election Propaganda

While the spoils belong to the winner, don’t let sour grapes spoil your association’s election. There are many ways to spoil an election. To name just a few, the ballots may not have all of the candidate’s names listed; in a condominium election, the premature opening of the outer envelopes often leads to a new election; and the failure to allow the members to observe the tallying of the ballots. There is also another type of election spoiler that is the subject of today’s column.

Last year, I was driving through an association on my way to a board meeting. A young woman handed me what I thought was literature about an upcoming show in the clubhouse. Rather, it was negative election propaganda. After reading it, I was sick to my stomach. The propaganda did not directly identify the candidate who was being verbally attacked, and moreover it was not even signed by the coward(s) who wrote it.

I would venture an educated guess that its anonymous author(s) thought they were being clever by not identifying the name of the board candidate whom they were negatively writing about. Later that morning, when I read the handout, I was shocked! Amongst other things, the candidate running for the board was referred to as a thief and a liar. It was patently clear who the anonymous writer was writing about because the writer also included sufficient personal information about the candidate they were defaming, such that even I could figure it out.

On the one hand, it’s great to see a contested association election. It is always wonderful to have more candidates than available seats on the board. So often, the opposite occurs. On the other hand, it’s despicable when an association election leads to such ghastly and reprehensible behavior.

Depending on the severity of certain activities that occur during an association election, and their overall effect on the election, determines whether a new election is warranted. For example, in 2004, the president of a condominium association prepared a letter on association letterhead, signed by him as president which commented in a negative light on the assertions made in a candidate information sheet. The president’s letter was included in the second notice of election mailed to the unit owners. Florida Administrative Code, Rule 61B-23.0021(8), clearly prohibited the board from commenting on a candidate in the second notice of election. The Division of Condominium held that, to permit a board member to comment on a candidate, even where such action is short of full board participation or board approval, would render the safe haven provisions of the rule meaningless. A new election was ordered.

As to mistakes that sometimes lead to a new election, the result often depends on whether the mistake changed the result of the election. For example, in 1993, where a condominium board discovered shortly before the election that a candidate was ineligible to sit on the board, the fact that the ineligible person was not withdrawn due to time constraints did not render the election void. The result of the election would not have changed if the ineligible candidate had been withdrawn from consideration.

In 1994, when a condominium association discovered that eleven ballots were missing and were not counted by the association, and in 1996, when a condominium association improperly disregarded two ballots, and where the error was unintentional and did not affect the outcome of the election, the Division of Condominium, in both instances, did not require a new election. Pragmatically, neither error would have changed the outcome. The lesson of today’s column is simple. If the news you need to share is so compelling, do so with truth and honesty, and have the courage to stand behind what you write.

January 6, 2012

New Mediation Requirements to Usher in the New Year

In a few short days, the year 2012 will arrive. By now, our entire nation has felt the impact of the mortgage foreclosure crisis. We have learned that the situation was far more grave than we were initially led to believe. Meanwhile, the cost of living continues to rise, while long standing benefits and income levels decrease. Will 2012 be another doom and gloom year? I sure hope not!

While not making headline news yet, there may be reason for hope that the worst of the real estate crisis is over. Maybe, developers will begin construction for homes in new and existing community associations while shrewd investors continue bargain hunting. There sure are some great real estate bargains out there.

It would be great if December’s good will and cheer lasted all year. It always seems around the middle of January that the well runs dry. When it does, there are two changes to court ordered mandatory mediation that every association board member should know.

The first comes to us from a December 19, 2011 Order from the Florida Supreme Court and is limited to lender foreclosure litigation. By way of background, a statewide managed mediation program for residential mortgage foreclosure cases began in 2009. The program was created to help alleviate the overcrowded court dockets caused by the residential foreclosure crisis and the mortgage litigation that followed in its wake. The Court determined “it cannot justify continuation of the program.” Nevertheless, cases already referred to the foreclosure mediation program remain subject to its requirements. No new cases will be referred. This foreclosure mediation program that was recently abolished should not be confused with the mediation that regularly occurs during litigation … which brings us to the second change you should know about.

Effective January 1, 2012, the Florida Rules of Civil Procedure require all parties attending mediation to take the following action in writing at least 10 days prior to the date of the mediation: 1) identify who will appear on behalf of the association, and 2) those attending must certify they have actual settlement authority.

On January 1, Rule 1.720 of the Florida Rules of Civil Procedure, will provide, in relevant part, that “a ‘party representative having full authority to settle’ shall mean the final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement on behalf of the party. Nothing herein shall be deemed to require any party or party representative who appears at a mediation conference in compliance with this rule to enter into a settlement agreement … unless otherwise stipulated by the parties, each party, 10 days prior to appearing at a mediation conference, shall file with the court and serve all parties a written notice identifying the person or persons who will be attending the mediation conference as a party representative or as an insurance carrier representative, and confirming that those persons have settlement authority.”

In plain English, this means that the board must provide its representative(s) attending the mediation with settlement authority without the need for further ratification and approval at a subsequent board meeting. Depending upon how this modified rule of Florida Civil Procedure is implemented and interpreted, it could require a majority of the board to attend the mediation so that the settlement can be approved right then and there. Alternatively, since there is an obligation to settle, perhaps it will be sufficient for the association’s representative attending the mediation to have full settlement authority subject only to “certain limits not to exceed” as decided by the board in advance of the mediation.

May your new year be filled with happiness and prosperity.

January 26, 2011

Reserves, Reserves, Reserves

It’s election season again and you know what that means, right? If you live in a condominium, then typically at your annual meeting, in addition to the election, the association’s opportunity to vote to waive or reduce reserves takes place, too. Here are a few helpful hints to keep in mind:

Condominium association budgets must include fully funded reserves in their annual budget for each item whose replacement costs are greater than $10,000.00. Each such item is required to have its own line item reserve in the budget, unless the association decides to “pool” their reserves. This means that there is one line item for all items within the “pooled” reserve. Reserves must only be used for their designated purpose unless the unit owners vote to use them for a different purpose. If the unit owners do not vote to waive or reduce the reserves, then, pursuant to state law, the fully funded reserves go into effect.

Reserves should be budgeted based on a straight line method. This means that if the cost to replace the roof is $100,000 and its life is 30 years, the association should include $3,333.33 per year for reserves (100,000 30). If repairs are made that affect the remaining useful life, then the association can take that into account, too. Effective July 1, 2010, the requirement to have a reserve study was deleted from Chapter 718, Florida Statutes, the Condominium Act.

To waive or reduce condominium reserves requires an affirmative vote of the majority of the unit owners at a members’ meeting where a quorum was present. To use condominium reserves for a different purpose other than for which they were accrued or to begin “pooling” reserves, a majority of all unit owners must vote in favor of this change. The requirement that a developer controlled board cannot raise the budget by greater than 115% over the previous year does not, amongst a few other things, include the tabulation of the reserves in the budget calculation that determines whether the increase is greater than 115% over the prior year.

Homeowners’ association reserves are a bit different. There is no requirement that forces an HOA to include reserves in the budget unless the developer initially includes them, or the majority of the entire membership votes in favor of accumulating reserves. Therefore, if your HOA’s budget includes a line item called “reserves” but neither the members voted to accumulate them, nor did the developer initially vote to establish them, then the HOA’s reserves are more akin to a voluntary savings account.

Regardless of whether you live in an HOA or a condominium, it pays to be circumspect as to how your association board presents the choice to waive or reduce the reserves. More often than not, the limited proxy/ ballot provides the choice to fully waive or to reduce by either a certain percentage or by leaving it up to the discretion of the board. Providing more than one choice means that your association is less likely to accomplish either result, and the unintended, but very real result, is that the required votes to pass either option is diluted. If the Board is going to provide the option to waive or reduce, then consider presenting only one option.

Keep in mind that, reserves are forced savings accounts to replace items that have a limited life so that the money is accrued by the time you need to replace the reserved item. While waiving or reducing reserves may seem like it’s saving you money, consider the fairness of the following scenario: Mr. Jones lives in a condominium where reserves are waived year after year. After 20 years of enjoying his home, Mr. Jones moves. Six months later a new roof is required. The result is that Mr. Jones enjoyed the roof for those 20 years and never had to contribute towards the savings for a new roof. Meanwhile, the person that bought his unit is stuck with the special assessment bill!