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Consider this: A quasi-governmental utility company, let’s call it “Florida Electric” (a fictitious company) seeks to enter the sprawling common areas of several sub-associations to do some below ground work necessary to provide better service. While each sub-association is managed by the same management company, each sub-association is represented by a different law firm. The first time Florida Electric requests a sub-association sign their “Easement Agreement” the manager sends it to that sub-association’s lawyer who substantially edits the document to provide better protection for their association client.

Florida Electric makes the same request of the other sub-associations. Rather than involve each of the remaining sub-associations’ lawyers, the manager privately shares the previously negotiated Easement Agreement with the other sub-associations to avoid legal expenses for the other sub-associations.  While this is a made-up story, similar events do happen in the real world, and likely with more frequency then we are aware. Let’s take a look at just a few issues that can arise from such events.

For starters, the manager has done the other sub-associations an extreme disservice by practicing law without a license.  Each community is set up to function differently by their developers, and that includes different easement rights and differing degrees of authority granted to each board. What may have been permissible by one sub-association board could be prohibited without an owner vote in another. Moreover, the limits for Florida Electric’s liability may need to be set at differing amounts pending insurance coverage concerns that also often differ greatly amongst similarly situated sub-associations. Likely, the manager could face civil and criminal theft of service charges. A complaint to the Florida Division of Professional Regulation is a very real possibility, too. Moreover, the manager has exposed the board members to liability, too, as they are complicit factors in the managers bad acts and have completely abrogated their duty to exercise their reasonable business judgment in such an illicit scheme.

The Supreme Court of Florida has given The Florida Bar the duty to investigate and take action against the unlicensed practice of law through “The Standing Committee on Unlicensed Practice of Law”.  It is currently considering a request for formal advisory opinion on whether certain activities, when performed by community association managers, constitute the unlicensed practice of law.

In a recent written request from the Chairman of the Florida Bar’s Real Estate Section, confirmation is sought that the activities previously found to be the unlicensed practice of law in the Florida Supreme Court’s 1996 opinion continue to be the unlicensed practice of law. Those activities include the drafting of a claim of lien and satisfaction of claim of lien; preparing a notice of commencement; determining the timing, method, and form of giving notices of meetings; determining the votes necessary for certain actions by community associations; addressing questions asking for the application of a statute or rule; and advising community associations whether a course of action is authorized by statute or rule. The Chairman also asked the Standing Committee to confirm if the unlicensed practice of law for a community association manager includes:

1)    Preparation of a Certificate of Assessments due once the delinquent account is turned over to the association’s lawyer;

2)    Preparation of a Certificate of Assessments due once a foreclosure against the unit has commenced;

3)    Preparation of Certificate of Assessments due once a member disputes, in writing, to the association the amount alleged as owed;

4)    Drafting of amendments (and certificates of amendment that are recorded in the official records) to the governing documents;

5)    Determination of number of days to be provided for statutory notice;

6)    Modification of limited proxy forms promulgated by the State;

7)    Preparation of documents concerning the right of the association to approve new prospective owners;

8)    Determination of affirmative votes needed to pass a proposition or amendment to recorded documents;

9)  Determination of owners’ votes needed to establish a quorum;

10) Drafting of pre-arbitration demand letters required by Section 718.1255,       Florida. Statutes;

11) Preparation of construction lien documents;

12) Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, etc.;

13)  Identifying, through review of title instruments, the owners to receive pre-lien letter; and

14) Any activity that requires statutory or case law analysis to reach a legal conclusion.

To read a full copy of the Chairman of the Florida Bar Real Estate Section’s letter seeking the advisory opinion, go to www.Floridabar.org. Then, click the “lawyer regulation” link, and then click “unlicensed practice”, and finally click “formal advisory opinions”.

Living in a community association brings with it many obligations and responsibilities such as the need to pay assessments and maintain your property.  Additionally, living in a community association also means that every member has certain basic rights.  Do you know your rights?

YOUR BILL OF RIGHTS 

1)    The right to receive at least 48 hours notice of board and certain committee meetings inclusive of an agenda of the items to be addressed;

2)    The right to receive at least 14 days notice of annual and special members’ meetings and any meeting at which the board will consider a special assessment, and rules pertaining to a condominium unit or HOA lot use;

3)    The right to receive as a condominium unit owner the appropriate notice for committee meetings where the committee will take final action on behalf of the board or make recommendations to the board regarding the budget;   and the right as a homeowners association lot owner to receive the appropriate notice for committee meetings where a final decision will be made regarding the expenditure of association funds or where the committee will make decisions regarding architectural decisions with respect to specific parcel of residential property owned by a member of the community;

4)    The right to address the board on each and every agenda item, subject to reasonable rules  adopted by the board;

5)    The right to record board and member meetings subject to reasonable restrictions;

6)    The right to receive at least 14 days prior notice of any hearing where consideration of a fine may be levied against you for failing to abide by the associations governing documents;

7)    The right to vote for the board so long as you are not delinquent greater than 90 days in any monetary obligation due to the association;

8)    The right to use the common areas and common elements of the association so long as you are not delinquent greater than 90 days in any monetary obligation due to the association;

9)     The right to inspect the association’s official records subject to the reasonable rules   adopted by the association;

10)  The right to vote for recall of any existing board member;

11)  The right to run for the Board of Directors so long as you are not delinquent greater       than 90 days in any monetary obligation to the association and are  not a convicted felon whose rights have not been restored for at least five years;

12)  The right to receive certain financial records as it relates to the association;

13)  The right to exclusive use of your  unit or lot, as the case may be;

14)  The right to participate in the decision of whether the association should bring    certain lawsuits;

15)  The right to express your opinions free from “SLAPP” lawsuits.

*  *  *  *  *

In short, SLAPP lawsuits are used to stifle and otherwise silence critics. The term “SLAPP” is an acronym for “strategic lawsuits against public participation”.  The goal of any person in bringing a slap suit against an association member is to invoke fear in the member and increase their legal costs, etc., which lead to the exhaustion or abandonment of the member’s criticism.

Warning, an esoteric thought follows: In many ways SLAPP lawsuits are similar to the Alien and Sedition Act passed into law by President John Adams in 1798 in support of a more powerful and centralized government. In brief and by way of over simplification, when this Act was in effect you could be arrested for speaking out against the president.  Supporters of the Act argued that the Act allowed people to say what they wanted against the government, but it did not mean they were free from governmental retaliatory action after the comment was made.  Thus, citizens were free to express themselves, but it was not without consequence.

Nevertheless, from a practical perspective, the Alien and Sedition Act stifled free-speech because while you can say what was on your mind, you certainly could be arrested or otherwise penalized for doing so.  If an association member had to worry each time they spoke up against the present board that a lawsuit could be brought against them or a fine levied for speaking their mind, then the First Amendment of the United States Constitution would be nothing more than a meaningless mockery of a sham of a travesty shrouded in enigma wrapped  inside of a quagmire.  With that as our backdrop, while association members are free to express their thoughts, they should   do so with respect for their board members in light of the hard work they put in for the betterment of the community.

For some time now condominium and cooperative associations alike benefited from the implied warranty of habitability for construction defect damages.  While these rights are codified in Florida Statutes Chapter 718 (the “Condominium Act”) and Chapter 719 (the “Cooperative Act”), there is no similar codification in Chapter 720 (the “Homeowners’ Association Act”).

In plain English, and loosely stated, the “implied warranty of habitability” means that the home, as built, is reasonably fit for its intended purpose (i.e., that the home is suitable to live in).  But, just how far does the “home” extend?  In other words, if an off-site improvement, such as the roadways or drainage system, falls victim to a construction defect, does that mean the home is unsuited for occupancy?  While a court said “Yes”, the Florida Legislature and the Governor said “No”.

In July 2012, in Lakeview Reserve v. Marondo, the 5^th District Court of Appeals recognized, and thus judicially created, implied warranties for off-site homeowners’ association improvements. The sole issue in the case was whether the   homeowners’ association could maintain a claim for breach of the common law implied warranties of fitness and merchantability, also referred to as a warranty of habitability, against a builder/developer for defects in certain off-site improvements including roadways, drainage systems, retention ponds and underground pipes in a residential subdivision?

In Lakeview Reserve, the Association filed a complaint against the Developer for breach of the implied warranties of habitability based on latent defects (a fancy legal term that, in plain English, means “hidden defects”) in the subdivision’s common areas.  Specifically, it claimed that the roadways, retention ponds, underground pipes, and drainage systems throughout the subdivision were defectively constructed.  The Developer filed a “motion for summary judgment” (another fancy legal term that means there are no disputed facts and the party that filed the motion believes it is entitled to a verdict in its favor based on the application of existing law), arguing that the common law implied warranties do not extend to the construction and design of off-site improvements in a a subdivision, because these structures do not immediately support the home(s).  The trial court agreed with the Developer but, on appeal, the 5^th DCA reversed the trial court’s decision and ruled in favor of the HOA.  Then, on April 27, 2012, House Bill 1013 was signed into law by Governor Scott, which killed the recently created judicial remedies.

However, and importantly, all is not yet lost.  House Bill 1013 made patently clear that both the HOA’s and the purchaser’s of homes within them have other existing rights to pursue causes of action arising from defects based on contract, tort or statute.  In the end, what does all of this mean to your HOA?  It simply means that if an off-site improvement is the subject of a construction defect, such as an improperly built drainage system, an HOA and/or a member can still bring a cause of action against the developer for such things as failure to build the system as designed, etc., but the HOA won’t have the ability to include an additional cause of action for damages to off-site improvements that stem from a breach of the implied warranty of habitability.

If anyone other than the contractor with whom you have a signed contract is performing services or providing goods to your property, then you have financial exposure and could end up paying twice, unless you understand a few terms and make sure a few steps are followed. Florida’s construction lien law is both a blessing and a curse. Sadly, it seems that the only people that truly grasp its implications are contractors and lawyers. Simply put, if you pay the general contractor, but they fail to pay a subcontractor or supplier, then you could be responsible to pay them, even though you paid the general contractor, unless you protected yourself.  To do so, first we’ll examine contractors, architects, landscape architects,  interior designers, engineers, etc. when such individuals are in direct contract with the owner of the property, then we’ll examine suppliers (also known as “materialmen”) and subcontractors who are doing work on the property, but have no direct contractual relationship (“privity”) with the owner.

Pursuant to Chapter 713, Florida Statutes, any person or firm that performs services as an architect, landscape architect, interior designer, engineer, or surveyor who is performing their services pursuant to a contract with the owner, has a lien on the real property improved for any money that is due for his or her services. In addition, a supplier, laborer, or other contractor in “privity” with the owner, has a lien on the real property improved for labor, services, materials or other items required by or furnished in accordance with their contract.

Where it gets tricky, and where your liability to pay twice is created, is when a subcontractor or supplier performs work or services on your property and they are NOT in direct contract with you, the owner (meaning that there is no “privity” between the owner and the person providing the services or goods). It’s easy to protect yourself.  To do so, you need to understand a few new terms, the “notice of commencement”, “notice to owner” and “partial and full payment affidavits”. So long as you sign the “notice of commencement” and ensure your general contractor records it, the subcontractors and suppliers with whom you have no privity, can record and send you their “notice to owner.” So long as you are certain to demand partial and full receipt, be sure you receive partial and final payment affidavits from the general contractor along the way, too.

For the suppliers and subcontractors to be in a position to record and send their “notice to owner”, you are responsible to make sure your general contractor records the “notice of commencement” that is duly executed by you, as the property owner.  To record their “notice to owner”, the subcontractors and suppliers look to the “notice of commencement”.  In fact, the cautious subcontractor won’t begin work if they are not in privity with the owner when the “notice of commencement” is not recorded.

The “notice to owner” is a publicly recorded document that is also sent to the property owner to alert him or her of all subcontractors and suppliers who are not in direct privity with the owner and are providing services or goods to the owner’s property. In order for the subcontractors and suppliers to perfect their lien rights, they must serve their  “notice to owner” which sets forth the name and address of the person or entity providing the goods or services, a  description of the real property being improved, and the nature of the services or materials furnished or to be furnished.  If, after the “notice of commencement” is recorded, the supplier or subcontractor doesn’t complete the “notice to owner”, then, after a certain amount of time is passed, in the event you paid the general contractor who fails to pay the subcontractor or supplier, they will have a difficult time arguing that you, the property owner, are still responsible to pay them.

Prior to each payment, the property owner, at their sole option, can require the general contractor to first provide an affidavit which sets forth the names of each subcontractor and supplier who had  not been paid in full, and  the amounts due, or to come due, for labor, services or materials furnished. The owner has the right to rely on the contractor’s affidavit in making the partial and final payment meaning that any subcontractor or supplier who did not complete the “notice to owner” and where the owner of the property has no knowledge of the individual doing any work, then the lien rights of such subcontractor or supplier are not vested and do not attach to the property.

If you don’t follow these simple steps, then you’re at full risk for paying twice for the same work.

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.

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.

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.