REMBAUM'S ASSOCIATION ROUNDUP | The Community Association Legal News You Can Use

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Tag: HOA

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Accusations Of Racial Discrimination by the HOA

Admittedly there are always two sides to every story. This is why we have the American judicial system to get to the resolution of a matter as decided by the “trier of fact,” be it the judge or jury, after hearing from both the accuser and the accused (or in civil terms, hearing from the plaintiff and defendant). In most civil cases a plaintiff only needs to prove that a particular event was more likely than not to have occurred. This is referred to as a “preponderance of the evidence” standard of proof, meaning that a majority of the evidence favors the plaintiff’s position. But, before the parties can get to that stage, the plaintiff first must sufficiently allege a cause of action against the defendant. If not, then the plaintiff’s lawsuit is subject to being dismissed. Well, that is exactly what happened in the recent federal appellate case of Watts v. Joggers Run Property Owners Association, Inc., 133 F.4th 1032 (11th Cir. 2025), in which the plaintiff, Watts, appealed the dismissal of her case in its entirety by the lower court, the U.S. District Court for the Southern District of Florida.

In the underlying action, Watts alleged Joggers Run of taking unlawful actions against her, her family, and her guests due to their race and brought claims against Joggers Run under both the Fair Housing Act and the Civil Rights Act. Watts accused Joggers Run of selectively enforcing its rules pertaining to parking, pets, yard sales, and penalty fees against her and her family but not against non-Black residents. She accused the association’s president of referring to Black people as “monkeys” and another director of using derogatory, race-based comments. She alleged that she was limited to three minutes when addressing the board, but other non-Black owners were not so limited; and when she complained about this, somehow the board stripped her of her board membership without any notice to her. She alleged that the association denied her children use of the basketball courts because a director complained about there being noisy Black kids and “too many people of color” using the basketball courts. She alleged that the association accused her Black guest of trespassing and vandalizing cars. Other discriminatory practices were alleged in the lawsuit as well.

Joggers Run moved to dismiss the entire complaint for failure to raise any cognizable claim under both the Fair Housing Act and the Civil Rights Act. The lower district court granted that motion. While the lower court found that the alleged conduct of Joggers Run was reprehensible, it nevertheless ruled that none of Watts’s allegations could support her statutory claims and dismissed the lawsuit. Watts then appealed the dismissal to the U.S. Court of Appeals of the Eleventh Circuit, which ultimately reversed the lower court’s dismissal and remanded the parties back to the lower court for further
proceedings.

The standard of review employed by the Appellate Court is, in this instance, de novo, meaning the Appellate Court reviews the matter as if it were being considered for the first time, allowing for a new analysis of the facts and law involved. The Appellate Court noted that to withstand a motion to dismiss for failure to state a claim, the plaintiff’s complaint must include enough facts to state a claim for relief that is plausible on its face. The plaintiff must allege more than mere conclusions and formulaic recitations of the elements of a cause of action. But, however, in Fair Housing Act discrimination cases, the Appellate Court recognized that it can be difficult to define the precise formulation of a required prima facie case before the process of discovery has an opportunity to unearth all the relevant facts and evidence. That said, the allegations in the complaint should be judged by the required statutory elements.

The Appellate Court began its discussion with a brief history and the importance of the Fair Housing Act. As found by a bipartisan committee appointed by President Lyndon B. Johnson, national fair housing laws were necessary to end evident and profoundly divisive housing discrimination. In response, Congress passed the Fair Housing Act in 1968 to provide for fair housing within the United States; and in Sections 1981 and 1982 of the Civil Rights Act, Congress provided that all Americans, regardless of race, are entitled to equal contract and property rights.

While the Fair Housing Act makes it unlawful to discriminate against any person in the terms, conditions, or privileges of the sale or rental of a dwelling or in the provision of services or facilities in connection therewith because of race, color, religion, sex, familial status, or national origin, Congress did not provide a list as to what these “terms, conditions, and privileges” actually are. Later, through adoption of regulations by U.S. Department of Housing and Urban Development under the Fair Housing Act, we learn that access to communal spaces is within the scope of “terms, conditions, and privileges” of the sale or rental of a dwelling and that limiting the use of such privileges because of race would be a violation of the Fair Housing Act. In other words, when a person enters into an enforceable agreement for the purchase of property that includes a mandatory obligation to be a member of a homeowners’ association, then discrimination is prohibited as related to any of the privileges, services, and facilities afforded by membership in the homeowners’ association. The Appellate Court found that Watt’s complaint sufficiently alleged that she was denied equal access and treatment because of her race by Joggers Run.

In examining whether Watts had sufficient allegations to withstand the motion to dismiss regarding the Civil Rights Act, the Appellate Court found that it only needed to “initially identify an impaired contractual relationship under which Watts had rights.” The Appellate Court found, “The HOA rules created an enforceable contract that governed the residence rights and responsibilities and benefits of membership.” Because Watts alleged that the HOA violated its own rules and regulations by allowing non-Black residents to violate the rules and regulations while enforcing the rules and regulations against her and her family due to their race, Watts plausibly alleged that the contractual relationship was violated by Joggers Run in contravention of its own rules and regulations, which was sufficient to bring such a lawsuit. In fact, the United States Supreme Court broadly construes the Civil Rights Act to protect not merely the enforceability of property interest acquired by Black citizens but also their right to use property on an equal basis with White citizens.

Watts alleged that the Joggers Run created a dual property system where White owners could fully enjoy the amenities’ common areas and services while Watts, as a Black resident, could not. In conclusion the Appellate Court found that Watts’s complaint presented plausible claims for relief under the Fair Housing Act and under the relevant sections of the Civil Rights Act. Therefore, the case was reinstated and remanded back to the lower court for further proceedings.

Given that the facts of the case have yet to be tried in court, whether racial discrimination occurred against Watts remains to be heard and determined by the trier of fact. All that we know for the time being is that Watts has sufficiently stated her complaint to make a primary showing of discrimination, but whether it actually occurred or not will have to be decided later after all relevant evidence and testimony is reviewed by the trier of fact.

Reviewing the alleged facts in a light most favorable to and as presented by Watts, it certainly seems as though discrimination may have occurred. However, could Joggers Run have accomplished the car towing, the closing of the basketball court, and its other actions in a lawful, non-discriminatory manner? The short answer is, “likely so,” if it had equally enforced its rules and regulations against all owners and followed the required procedures. Had Joggers Run equally enforced its rules and regulations and followed the required procedures, then Watts’s claims could have failed.

Regardless of equal enforcement, making disparaging comments regarding any member’s race, color, religion, sex, familial status, or national origin is not only fundamentally wrong but also sets the stage for all the board members’ acts to be judged with those racially charged comments in mind. To make such comments as a board member could be, if proven true, fatal to the association’s position. Had the Joggers Run board members not made racially motivated comments, if it did as alleged by Watts, and had they engaged the association’s attorney to provide important and necessary guidance, then in all likelihood this entire fiasco could have been avoided.

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Board Member Fiduciary Duties Owed to the Association

What is the standard of care that a community association officer and board member owe to their association? The Homeowners’ Association Act (Ch. 720 Fla. Stat.) provides in §720.303, “The officers and directors of an association are subject to §617.0830 and have a fiduciary relationship to the members who are served by the association.” The Condominium Act (Ch. 718 Fla. Stat.)  in §718.111 similarly provides, “The officers and directors of the association have a fiduciary relationship to the owners.”  Still, though, there is no express definition of the term “fiduciary relationship” set out in either piece of legislation.

With that in mind, let’s take a look at some of the more common definitions of the term “fiduciary,” including the following:

      • A fiduciary relationship is a relation between two parties wherein one party (fiduciary) has the duty to act in the best interest of the other party (beneficiary or principal).
      • A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person.
      • A fiduciary duty is a relationship in which one party places special trust, confidence, and reliance in and is influenced by another who has a fiduciary duty to act for the benefit of the party.
      • Most importantly, and germane to this discussion, a fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust.

From all of this we can glean that a good community association board member puts the interest of their association well above their own personal interests. Not only are homeowners’ associations subject to Chapter 720, Florida Statutes, and condominium associations subject to Chapter 718, Florida Statutes, but both are subject to Florida’s Not-For-Profit Corporation Act, Chapter 617, Florida Statutes. Section 617.0830, Fla. Stat., provides a mechanism that will shield a director from breach of fiduciary duty claims so long as they follow the requirements set forth in this ever-important piece of legislation.

Section 617.0830, Fla. Stat., provides,

A director shall discharge his or her duties as a director, including his or her duties as a member of a committee, In good faith;

With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

In a manner he or she reasonably believes to be in the best interests of the corporation.

In discharging his or her duties, a director may rely on information, opinions, or reports, including financial statements and other financial data, if prepared or presented by the following:

One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or

A committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.

A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by i, ii, and iii immediately above unwarranted. (In plain English and for example, this means if you have reason to know that you should not rely on such professional advice because say the expert was impaired, then relying on his or her advice will not provide the statutory protection.)

A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with all of the aforementioned.

Therefore, for example, should the association’s legal counsel or other selected expert in a particular field provide advice to the association’s board and then the board member decides to act in a contrary manner, then such board member would not have the aforesaid statutory protection and, in fact, could be accused of acting in bad faith should they act in a manner contrary to the advice or instruction of the expert.

Condominium association directors should be aware that pursuant to §781.112, Fla. Stat., a willful and knowing failure to complete the structural integrity reserve study and/ or the milestone inspection when required to do so is considered to be an automatic breach of such officer’s and director’s fiduciary relationship to the unit owners. Yikes!

Additionally, the “business judgment rule” protects board members from their decision making so long as the board member acted in such a manner as would any other reasonably prudent person under similar circumstances. Generally, the decisions of directors are not subject to successful attack unless there is a showing of fraud, criminal activity, self-dealing, dishonesty, or incompetency. In fact, in the often-cited seminal case Sonny Boy, L.L.C. v. Asnani, 879 So. 2d 25, 28 (Fla. 5th DCA 2004), the court held that the directors of a condominium association were not personally liable for failing to maintain and repair common elements where the accusation was that rental revenue was lost as a result thereof because there was no showing of fraud, self-dealing, or unjust enrichment.

The Sonny Boy court went even further when it wrote in its opinion that “it is well established in Florida that absent fraud, self-dealing and betrayal of trust, directors of condominium associations are not personally liable for the decisions they make in their capacity as directors of condominium associations.” See, e.g., Perlow v. Goldberg, 700 So.2d 148 (Fla. 3d DCA 1997) (finding directors of condominium associations not individually liable for actions and governance of condominium association); Taylor v. Wellington Station Condominium Association, Inc., 633 So.2d 43 (Fla. 5th DCA 1994) (finding that in general, corporate directors and officers cannot be personally liable for corporate acts absent actual wrongdoing in the form of fraud, self-dealing, or unjust enrichment to trigger individual liability); Munder v. Circle One Condominium, Inc., 596 So.2d 144 (Fla. 4th DCA 1992) (reversing lower court’s finding of individual liability by condominium developer). Similarly, §617.0834(1), Florida Statutes  (2002), and §607.0831(1), Florida Statutes (2002),[2] provide insulation for condominium association directors from liability in their individual capacities absent fraud, criminal activity, self-dealing, or unjust enrichment. Perlow, 700 So.2d at 149.”

In Grand Harbour Community Association, Inc. v. G.H. Vero Beach Development, LLC., Case No. 4D2023-1191, (Fla. 4th DCA Oct. 2, 2024), the trial court had found that the developer and the developer-appointed directors were entitled to summary judgment on the breach of fiduciary duty claim because no evidence existed that the developer-appointed directors had acted in bad faith in failing to fund the reserves or in undercharging the developer for its deficit funding obligation, and therefore there was no basis to hold the developer vicariously liable for the acts of its appointed directors. Then, on appeal, the 4th District Court of Appeal affirmed the trial court ruling because “the community association declaration provided that the board members shall not be liable for any mistake of judgment, negligent or otherwise, except for their own individual willful misfeasance, malfeasance, misconduct, or bad faith.””

The appealate court continued, “Under Florida law, the ‘business judgment rule’ protects directors of non-profit corporations, from personal liability for any actions undertaken as directors ‘absent a showing of bad faith, self-dealing, or a violation of criminal law,’” citing New Horizons Condo. Master Ass’n. v. Harding, 336 So. 3d 796, 799 (Fla. 3d DCA 2022).

In yet another case, Miller v. Homeland Prop. Owners Association, Inc., 284 So. 3d 534, 537 (Fla. 4th DCA 2019), the court held that deference to community associations’ decisions must be given when i) the association had the contractual or statutory authority to perform the relevant acts; and ii) the board acted reasonably and not in an arbitrary, capricious manner or in bad faith.

So, while Florida Statutes and relevant case law provide a strong level of protection in favor of officer and board member decision making, such decisions should be rendered reasonably, in reliance on expert opinions (when relevant), and not decided in bad faith or in an arbitrary and capricious manner or in a manner that suggests self-dealing or unjust enrichment, etc. in favor of the officer and director(s).

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Not all Expenditures Can Be Collected from Delinquent Owners as Part of the Collection/Foreclosure Process – Why Not?

It is clear that Florida’s community association collection/foreclosure legislation allows associations to foreclose an owner’s home for nonpayment of assessments. However, not all of the monies expended by an association fit into the definition of an assessment. For example, let’s say that an association has a right to correct a deficiency on an owner’s lot, but the declaration of covenants at issue does not support converting the money spent into an assessment. In that event, the monies expended by the association would have to be recovered as part of a breach of contract action rather than as part of an assessment/foreclosure action. Sometimes, however, the declaration will provide that the monies expended can be treated as an assessment. If that is the case, then before those expenditures can be included as a part of the collection/foreclosure process, the board would need to convert the expenditure into an assessment against the noncomplying owner. (As to how that is done, you can discuss it with your community association’s attorney.) Florida’s collection/foreclosure legislation also provides for recovery of certain costs incidental to the collection/foreclosure process, but recovery of such cost must be rooted in a statute or by contract (i.e., the declaration of covenants).

Let’s look at the fee charged by a management company for sending the notice of late assessment letter, often referred as a NOLA letter, as required by Florida Statute, and determine whether it is a recoverable cost in an association’s collection/foreclosure action and whether including the NOLA fee as a part of the association’s collection/foreclosure proceedings violates the Federal Fair Debt Collection Practices Act (the Act).

The Act was passed into law because of abundant evidence of the use of abusive, deceptive, and unfair debt collection practices. It does not matter whether a debt collector used their best efforts to comply with the Act. Only strict compliance matters when it comes to the enforceability of the Act against a debt collector. Clearly, the association is not considered a “debt collector” pursuant to the Act and, for the most part, neither are management companies, with this caveat: the pendulum may swing in the future to the notion that management companies are, in fact, debt collectors. It seems that at least for the time being they are shielded from the Act. However, what is patently clear is that an attorney who provides collection/foreclosure services to assist their association clients with delinquent assessments is certainly considered a “debt collector.” Therefore, the attorney must be vigilant when reviewing the delinquent owner’s account ledger to ensure that the items set out in the ledger can lawfully be included in the association’s collection/foreclosure action. A recent case reminds us of this fact.

On February 4, 2025, in Glover v. Ocwen Loan Servicing, Case no. 23-12578 & 12579 (11th Cir. Fla. 2025), the 11th Circuit of the Federal Court of Appeals found that Ocwen as a debt collector violated the Fair Debt Collection Practices Act when it charged consumers an optional fee when making expedited mortgage payments because the loan servicer charged an amount that was not expressly authorized by the agreement creating the debt or permitted by law. The takeaway from this case is that a debt collector can only collect debts that are authorized by law or by contract with the debtor.

It was only several years ago that the Florida legislature enacted into law the requirement that an association assessment debtor must be provided the NOLA correspondence from the association providing the debtor a final opportunity to pay their delinquent assessment debt prior to turning the matter over to the association’s legal counsel to commence collection/foreclosure proceedings where fees and costs accrue against the debtor. See S. 718.121 and S. 720.3085, Fla. Stat.

Management companies are typically tasked with preparing and sending the NOLA letter on behalf of the associations they manage before turning the file over for collections to the association’s attorney. In this regard, a management company that is charging such a fee but has not amended its contract with the association to provide for charging the fee for the notice of late assessment would be wise to consider amending its contract with the association they represent to provide for this charge. Doing so would ensure that the management company, even though it may not be considered a “debt collector,” would have a solid basis for charging the fee because it would be based on a contractual obligation charged to the association. This is important because the NOLA, as mandated by Florida Statutes, does not at all provide for the recovery of a fee in regard to sending such a letter. So, while management companies may not be considered a “debt collector” today, this could change in any new case at any time. Why take the chance?

Now, let’s analyze whether the attorney who is collecting the past due assessment debts for the association can include the management company’s NOLA fee paid by the association to the management company in the collection/foreclosure action against a delinquent owner. Keep in mind, as we go through the analysis, that the “debt collector” (in this case, the attorney) can only collect debts authorized by contract or by law, and also remember that the relevant laws governing the NOLA letter do not provide for a specific cost recovery for the management company sending of the notice of late assessment letter. Thus, at a minimum, there should at least be a contractual obligation that the association pay the management company for sending the NOLA letter. But that may not always be the case even though it is the better practice.

Part and parcel with the collection/foreclosure process is the recording of an association assessment lien. To be valid, such a claim of lien must state the description of the parcel, the name of the record owner, the name and address of the association, the assessment amount due, and the due date. The claim of lien secures all unpaid assessments that are due and that may accrue subsequent to the recording of the claim of lien and before entry of a certificate of title, as well as interest, late charges, and reasonable costs and attorneys’ fees incurred by the association incident to the collection process.

So, while the relevant statutes do not provide for the association to be able to recover a fee for the sending of the NOLA letter, it certainly should be considered a “reasonable cost incurred by the association incident to the collection process,” most especially when the fee charged for sending the NOLA letter is a contractual obligation between the association and the management company.

There even exists an argument that, even if the management contract between the association and the management company does not provide that the association is responsible to pay the management company for the preparation and sending of the notice of late assessment, it is still considered a “reasonable cost”; but when you plug in the holding of the aforementioned case, the collection of the cost associated with the NOLA letter by the debt collector (i.e., the attorney representing the association), the better practice is to ensure that the contract between the management company and the association contains a provision that the association is responsible to pay the management company a reasonable fee for each such notice of late assessment letter sent.

Perhaps now you have a better understanding of why, at times, the association’s collection/foreclosure attorney cannot include a particular line item on the delinquent owner’s account ledger in the collection/foreclosure action. If you have any questions regarding the collection/foreclosure process, most especially which charges can and cannot be included, please be sure to discuss them with your association’s attorney.

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U.S. Treasury Department Announces Suspension of Enforcement of the CTA

U.S. Treasury Department Announces the Suspension of Enforcement of the Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies

Keeping up with the “on again, off again” requirements of the Corporate Transparency Act is like watching a basketball bounce up and down. Finally, however, it appears as though the point guard took the shot and the basket is made.

On March 2, 2025, The Treasury Department announced that, with respect to the Corporate Transparency Act, not only will it NOT enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further NOT enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.

The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

You can view the official Press Release HERE.

It was also rumored that the Executive branch made an announcement that the United States Treasury will be suspending all future enforcement of the Corporate Transparency Act on American businesses and is working towards an emergency rule for codification of the new enforcement policy in furtherance of its goals toward less governmental regulation.

As new information is obtained we will share it with you, our readers.

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Thinking of Filing a New Lawsuit?

Thinking of Filing a New Lawsuit?

The Florida Supreme Court approved multiple substantial amendments to the Florida Rules of Civil Procedure that went into effect on January 1, 2025. While these changes are significant, they do not appear to be terribly overwhelming. This article is not intended to provide a comprehensive review of these changes but rather to point out some of the more interesting changes. It is important to note that these new procedural amendments to the Florida Rules of Civil Procedure only apply to lawsuits filed on or after January 1, 2025. In speaking with several litigators about these new rules, their takeaway is that a plaintiff best be ready for trial when filing your lawsuit. They say this because of the new discovery rules that fast track the process.

Courts now have the authority to extend deadlines for responding to motions either with or without a formal motion and with or without notice. This increased flexibility should streamline procedural timelines and reduce delays. Litigants may find that the court is not as willing to grant such motions as it was in days gone by.

Newly filed cases must be assigned to one of three tracks: complex, general, or stream-lined within 120 days of the filing date. Each of the three tracks has their own unique deadlines for filing and service of motions, etc., ensuring that the cases are managed according to their complexity.

Deadlines outlined in case management orders, which must be issued by the relevant court within 120 days of the commencement of action, will be strictly enforced unless modified by a court order. Obtaining extensions for these deadlines will be more challenging and limited to extraordinary circumstances only.

Courts can schedule case management conferences either on their own initiative or upon proper notice by a party. When a party requests such a conference, it must outline all specific issues to be addressed and provide a list of all pending motions. Failure to include unresolved motions may result in those motions never being heard by the court, highlighting the importance of thorough preparation.

Interestingly, motions for summary judgment and motions requiring an evidence hearing may be heard at case management conferences upon agreement of the parties. Attorneys are now expected to enter the courtroom prepared to make decisions and enter binding agreements regarding motions, issues, and scheduling. The excuse  “I need to check with my client” does not seem as though it will suffice any longer.

Failure to attend a case management conference can lead to serious consequences, including the dismissal of the action, striking of pleadings, or limitations on witness testimonies.

When filing a motion that is not dispositive of the case (a dispositive motion is a motion to dismiss or motion for summary judgment), the moving party must file a statement with the court certifying that they conferred with the opposing party and whether the opposing party agrees on a resolution of the motion or not.

Certain discovery disclosures must be made within a 60-day window after service of the complaint is completed, and discovery cannot commence before these initial disclosure obligations are satisfied unless otherwise provided for by court order.

Objections to interrogatories must be stated with specificity including the actual reasons for objecting, and if done incorrectly such objections can be considered waived. The same goes for production of documents required by subpoena.

Motions to continue the trial date are now disfavored and should be rarely granted except upon a showing of good cause.

The deadline to respond to a motion for summary judgment is 40 days after service of the motion. A hearing on the motion must be scheduled at least 10 days after the response deadline. Due to previously congested court calendars, it has been nearly impossible to schedule hearings promptly. Hopefully this will no longer be the case.

The Florida Supreme Court hopes that the adoption of these changes to the Florida Rules of Civil Procedure will streamline cases to help avoid backlogs, to provide for more timely hearing of motions, and most importantly to keep the case on track for the intended trial date unless the case is settled sooner.

Only time will determine whether these procedural changes achieve their intended effects. The legal community will no doubt closely monitor the implementation and impact of these amendments on the efficiency and effectiveness of Florida’s civil litigation process.

What is the takeaway from all of the above information? Well, those in the know say that the plaintiff in any newly filed a litigation better have all of their ducks in a row before they file their lawsuit. Failure to be prepared in this fashion could be disastrous. Stay tuned for further updates and analyses as these rules take effect and are applied in practice. Of course, your association’s attorney can also explain these procedural changes to you as they may relate to your association’s litigation.

Written by Jeffrey Rembaum, Esq. Reprinted with permission as it appears in the February 2025 issue of the Florida Community Association Journal.

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The Consequences of Failing to Maintain The Official Records

The Consequences of Failing to Maintain the Official Records

The following scenario happens all too often. A member makes a written records request to inspect the official records of the association and proceeds to provide a laundry list of documents that the member wants to inspect. In response, the association may arrange to have the member come to the property management office to inspect the records or, if the laundry list is not extensive, provide the requested records to the member by making copies or providing them electronically. Sometimes, however, associations do not always maintain official records in accordance with the requirements of Chapters 718 and 720, Fla. Stat., and an association may argue that it gave the member what it could, so that is all that really matters, right? Wrong! If your association operates this way, you are in for a surprise.

In the case of William Pecchia and Kathleen Porter v. Wayside Estates Home Owners Association, Inc., 388 So. 2d 1136 (Fla. 5th DCA 2024), litigation initially arose between the homeowners (Pecchia and Porter) and the association due to the belief by Pecchia that the association was failing to maintain the common area and that the association was not enforcing violations. Pecchia observed that over the years the association lowered annual assessments and seemed to spend less money on maintenance despite observable deteriorating conditions to the property.

Accordingly, Pecchia requested to inspect the association’s records including copies of several years’ worth of insurance policies and certain records relating to the association’s upkeep of lots and common areas, including financial statements, canceled checks, and bank statements. The association did not respond to Pecchia’s records request in the statutory timeframe of 10 working days, and when it finally did respond, only copies of some of the requested records were provided. Eventually Pecchia submitted a renewed request for records, and then the parties negotiated for several months to no avail. Finally Pecchia filed for injunctive relief against the association. Initially Pecchia was unsuccessful in convincing the trial court that the association failed to maintain and produce requested records and was unsuccessful in obtaining an injunction against the association mandating that the requested records be provided. She appealed.

However, on appeal the Appellate Court found the following:

      1. The association did not sufficiently comply with the requirements of section 720.303, Fla. Stat., (which pertains to HOA official records requests); and
      2. The association did not sufficiently comply with its obligations to maintain its common area and properly enforce violations of the governing documents.

During the trial court proceedings, in regard to whether the association sufficiently complied with section 720.303, Fla. Stat., the trial court found that the association did not provide copies of requested insurance policies but that the association was not statutorily required to provide requested bank statements and canceled checks because section 720.303(4), Fla. Stat., only requires that an association maintain “accounting records.” Despite the lack of the association providing all of the records requested by Pecchia, the trial court found that the association had provided “sufficient documents in response to the Plaintiff’s request.” Further, while the trial court found that while the requested records were not provided within the statutory timeline, the association was not in violation because “sufficient” documents were eventually provided to Pecchia’s request. The appellate court disagreed!

On appeal, the appellate court found that the trial court misinterpreted section 720.303(4)-(5), Fla. Stat., when it held that the association had sufficiently complied with the statute. In short the appellate court found that the use of the word “shall” in the foregoing sections meant that there was no flexibility in the association’s obligation to maintain records provided for in section 720.303(4) and to permit inspection in accordance with section 720.303(5). The appellate court went on to discuss the meaning of the word “shall” (i.e., being mandatory) and the meaning of the word “may” (i.e., being permissive).

Additionally, the appellate court discussed that pursuant to other subsections of section 720.303, Fla. Stat., financial penalties are provided for beginning on the 11th business day in which an association does not make records available. In the aforementioned case, although the association ended up providing (or making available for inspection) some of Pecchia’s requested records, it did not provide access to all of Pecchia’s requested records, including insurance records, bank statements, and canceled checks, all of which the appellate court held would be “included in the financial and accounting records which a homeowners’ association is required to maintain.” Additionally, the records provided were provided after the statutory deadline. As stated by the appellate court,

“[S]ections 720.303(4) and (5) do not provide for substantial compliance. Rather, the language of the statute clearly provides that a homeowners’ association “shall” (1) maintain all items enumerated in 720.303(4) and (2) make them available to the homeowners within ten business days upon request [for inspection or by providing the records requested]. This language is mandatory.”

In regard to finding that the association did not maintain the common areas, there is scant mention as to why the appellate court found this to be the case.

Those involved with homeowners’ associations should also be aware of some recent legislative changes that became effective and pertain to official records and are incorporated into the most recent revision to section 720.303, Fla. Stat. For example, by January 1, 2025, an association with 100 or more parcels is required to post many, but not all, of its official records on its website or make such documents available through an application that can be downloaded on a mobile device. Additionally, homeowners’ associations are now required to maintain most of their official records for a period of seven  years unless the governing documents of the association provide for a longer period of time. Also, homeowners’ associations must adopt written rules governing the method or policy by which the official records of the association are to be retained and the time period such records must be retained.

For those involved with condominium associations, there are also some recent legislative changes pertaining to official records that became effective and are incorporated into the most recent revision to section 718.111, Fla. Stat. For example, by January 1, 2026, an association managing a condominium with 25 or more units—which does not contain timeshare units—shall post copies of its official records on its website or app. If official records are posted on the association’s website or app, the association may direct the unit owner or their authorized representative to the website or app (at this time HOAs may not do similarly). Clarification is provided that email addresses and fax numbers are only accessible to unit owners if such owner has consented to receive their official notices by electronic transmission or has personally indicated that such personal information may be shared with other unit owners. Official records now include all invoices, transaction receipts, or deposit slips that substantiate any receipt or expenditure of funds by the association, copies of building permits, and all satisfactorily completed board member educational certificates. Additionally, official records must now be maintained in an organized manner that facilitates inspection by a unit owner. A condominium association must now provide a checklist of all records made available for inspection and copying along with records that were not made available to the requester. The condominium association must retain the checklist provided to every requesting member for at least seven  years. If a director, board member, or manager knowingly, willfully, and repeatedly (i.e., two or more times in a 12-month period) fails to provide official records, such person commits a misdemeanor of the second degree. Finally, if a person willfully and knowingly refuses to release official records with the intent to avoid or escape detection, arrest, trial, or punishment, then it is the equivalent of a felony of the third degree.

To conclude, all community associations should be diligent, prompt, and thorough in responding to official records requests. While associations are not required to “cherry pick” and provide specific records that a member demands to inspect, associations have the obligation to maintain the official records and provide an opportunity for members to inspect the official records. If you are unsure of which records must be posted to the association’s website, or if you are in doubt as to your association’s responsibility in regard to official records and official record requests, then be sure to consult with your association counsel regarding these important responsibilities.

Reprinted with permission as it appears in the January 2025 issue of the Florida Community Association Journal.

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Corporate Transparency Act Compliance and How to File Your Association’s Report

Corporate Transparency Act Compliance and How to File Your Association's Report

The Corporate Transparency Act (“CTA”) was enacted in 2021. The CTA requires that on or before January 1, 2025, all cooperatives, condominiums and homeowner’s associations (collectively, “Associations”) are required to file certain information with the US Treasury department, Financial Crimes Enforcement Network (“FinCEN”). This law requires businesses that are registered with their state’s division of corporations, which includes Community Associations, to provide information on its ‘Beneficial Owners’ which are the decision makers, meaning board members, and officers (and possibly managers, too). Your Association will need to comply with the registration requirements of the CTA or face significant penalties. In addition, any changes to the board members or officers must be reported by updating the information on FinCEN within 30 days of the change.

1) What is the CTA? The CTA aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (“BOI”) Report to the U.S. Department of Treasury’s FinCEN, providing details identifying the decision-making individuals for the Association.

2) What information will each Association have to report? An Association will have to report:

    • Its legal name;
    • Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
    • The current street address of its principal place of business if that address is in the United States (for example, company’s headquarters. The company address must be a U.S. street address and cannot be a P.O. box;
    • Its jurisdiction of formation or registration (State of Organization) and the date of formation;
    • Its Taxpayer Information Number; and
    • Any beneficial owner/board member (the decision maker).

3) Who is considered a beneficial owner of an Association? A beneficial owner of the Association is defined as an individual who either directly or indirectly exercises substantial control over the Association company. The Association will have to provide:

    • The individual’s name;
    • Date of birth;
    • Residential address; and
    • A copy of an acceptable identification document such as a passport or U.S. driver’s license.

Individuals who meet one of the following criteria are considered to exercise substantial control over the Association:

    • the individual is a senior officer;
    • the individual has authority to appoint or remove certain officers or a majority of directors of the Association, such as developers of a developer controlled Association;
    • the individual is an important decision-maker; or
    • the individual has any other form of substantial control over the Association.

4) When should an Association file this report? When should our report be updated?

    • An Association created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
    • An Association created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
    • An Association created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
    • Importantly, there are continuing registration requirements as well. Anytime there is any change in the beneficial ownership it must be reported to FinCin by updating the BOI report within 30 days of the event. This applies to such events as a mid-year replacement board member or officer and possibly after each year’s annual election, too.

5) Are there any penalties associated with not filing or missing the deadlines?

Yes. As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues, plus it is adjusted annually for inflation.

Both individuals and corporate entities can be held liable for willful violations such as a failure to comply with the FinCEN registration requirements. This can also include not only an individual who actually files (or attempts to file) false information with FinCEN, but also anyone who willfully provides the filer with false information to report.

6) Are there third-party service providers to help Associations with filing?

Yes. Associations may use third-party service providers to submit beneficial ownership information reports. Third-party service providers will have the ability to submit the reports via FinCEN’s BOI E-Filing website or an Application Programming Interface (API).

While there are many third-party providers which can be located by doing a simple Google search, at this time we cannot recommend one company over another. Therefore, we are merely sharing the following information which we discovered through our own Google search. Four companies assisting with the CTA filings include:

There are others, too.

We understand that some management companies may also offer this service for an additional fee. Whether to consider using your current management company or a qualified third-party provider is a Board business decision.

Please note that Kaye Bender Rembaum, P.L., will not be performing any FinCen registrations.

7) Can an Association file on its own, without the use of a third-party?

Yes, an Association may file on its own electronically through a secure filing system via FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov). There is no fee for submitting your BOI to FinCEN. An Association can access the form by going to FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov) and select “File BOIR.”

However, due to the potential liability exposure to the Association and possibly individuals, we do not recommend that an Association undertake compliance with this act by filing on their own.

8) Are there any efforts undertaken to exempt community associations from the registration requirements?

In July, 2024, the Community Associations Institute (CAI) Board of Trustees approved filing a lawsuit to exempt and protect community associations from burdensome requirements outlined in the Corporate Transparency Act. On October 11, 2024 there was a hearing on CAI’s request for a preliminary injunction against the U.S. Department of Treasury to try and exempt Community Associations from the burdensome reporting requirements of the CTA. A ruling is expected in the next few weeks, but not guaranteed. As such, for now, compliance with the CTA by January 1, 2025 remains required.

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2024 Legislative Clarifications for Board Members and Managers – An Update

2024 Legislative Clarifications For Board Members and Managers

The purpose of this article is to address the following:

    • Homeowners’ and condominium association board member certification requirements, certificate retention and continuing education requirements (all of which are quite different);
    • Condominium association and homeowners’ association hurricane protection requirements;
    • Clarify homeowners’ association website posting requirements and remind homeowners’ association board members of mandates from the 2024 legislation.

Chapter 718, F.S.: CONDOMINIUM ASSOCIATION BOARD MEMBER CERTIFICATION REQUIREMENTS, CERTIFICATE RETENTION AND CONTINUING EDUCATION REQUIREMENTS:

    • Each newly elected or appointed board member must submit to the secretary of the association the: (i) written certification AND (ii) educational certificate within 1 year before being elected or appointed or 90 days after the date of election or appointment.
    • Specifically, for the (i) written certification, all residential condominium board members must certify, in writing to the secretary of the association, that he or she has read the association’s declaration of condominium, articles of incorporation, bylaws, and current written 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.
    • For the (ii) educational certificate, condominium association board members must complete an educational curriculum that has been approved by the DBPR that is at least four hours long with certain mandated subjects.
    • A director of an association of a residential condominium who was elected or appointed before July 1, 2024, must comply with both written certification AND educational certificate requirements by June 30, 2025.
    • To reiterate, a director of an association of a residential condominium who was elected or appointed after July 1, 2024, must comply with both the written certification AND educational certificate requirement within 90 days after being elected or appointed to the board.
    • The written certification and/or educational certificate is valid for seven years after the date of issuance and does not have to be resubmitted as long as the director serves on the board without interruption during the seven-year period.
    • Continuing Education: In addition to the (i) written certification and (ii) educational certificate discussed above, one year after submission of the most recent written certification and educational certificate, and annually thereafter, a board member of an association of a residential condominium must submit to the secretary of the association a certificate of having satisfactorily completed at least one hour of continuing education administered by the division, or a division-approved condominium education provider, relating to any recent changes to this chapter and the related administrative rules during the past year.
    • Condominium association board members elected or appointed before July 1, 2024, have until June 30, 2025, to meet the new education curriculum requirement consisting of 1 hour of continuing education per year.
    • The condominium association must retain a director’s written certification and/or educational certificate for inspection by the members for seven years after a director’s election or the duration of the director’s uninterrupted tenure, whichever is longer.
    • Any director who fails to timely comply with the foregoing written certification and educational certificate requirements is suspended from service on the board until he or she complies.

Chapter 720, F.S.: HOMEOWNERS’ ASSOCIATION BOARD MEMBER CERTIFICATION REQUIREMENTS, CERTIFICATE RETENTION AND CONTINUING EDUCATION REQUIREMENTS:

    • Homeowners’ association board members elected or appointed to the board on or after July 1, 2024, must take a board certification course within 90-days after being elected or appointed to the board (no minimum time required, typically around two hours).
    • In addition, homeowners’ association board members must complete the education specific to newly elected or appointed directors at least every four years.
    • The DBPR approved educational curriculum specific to newly elected or appointed directors must include training relating to financial literacy and transparency, recordkeeping, levying of fines, and notice and meeting requirements.
    • In addition to the education course specific to newly elected or appointed board members, Homeowners’ association board members with fewer than 2,500 parcels in the association must take four hours of continuing education annually and if 2,500 parcels or more in the association, then eight hours of continuing education annually.
    • The homeowners’ association must retain each director’s written certification or educational certificate for inspection by the members for five years after the director’s election.
    • The ability of a recently elected or appointed homeowners’ association board member to simply submit a written certificate certifying that they 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 duties to the association, is no longer an option to meet certification requirements as it has been removed from Section 720.3033, Florida Statutes.

HURRICANE PROTECTION REQUIREMENTS:

    • Chapter 718, F.S.: Condominium Association Hurricane Protection Specifications. Each board of a residential condominium or mixed used condominium must adopt hurricane protection specifications for each building within the condominium operated by the association which may include color, style, and other factors deemed relevant by the board (please note that this provision used to apply to hurricane shutters but now applies to all hurricane protection).
    • Chapter 720, F.S.: Homeowners’ Association Hurricane Protection Specifications. The board or any architectural, construction improvement, or other similar committee of an association must adopt hurricane protection specifications for each structure or other improvement on a parcel governed by the association. The specifications may include the color and style of hurricane protection products and any other factor deemed relevant by the board. All specifications adopted by the board must comply with the applicable building code.

Chapter 720, F.S.: HOMEOWNERS’ ASSOCIATIONS NEW WEBSITE / APP POSTING REQUIREMENTS FOR THOSE HOA’S REQUIRED TO HAVE A WEBSITE / APP:

HOA New Website: By January 1, 2025, an association with 100 or more parcels shall post several documents within its Official Records on its website or make available such documents through an application that can be downloaded on a mobile device.

    • HOA New Website Posting Requirement for Members’ Meetings– Notice of any scheduled meeting of the members and the agenda for the meeting, as required by Section 720.306, Florida Statutes, at least 14 days before such meeting. The notice must be posted in plain view on the homepage of the website or app, or on a separate subpage of the website or app labeled “Notices” which is conspicuously visible and linked from the homepage. The association shall also post on its website or app, any document to be considered and voted on by the members during the meeting, or any document listed on the meeting agenda, at least seven days before the meeting at which such document or information within the document will be considered.
    • HOA New Website Posting Requirement for Board Meetings– Notice of any board meeting, the agenda, and any other document required for such meeting must be posted on the website or app no later than the date required for such notice.

REMEMBER, EVERY HOMEOWNERS’ ASSOCIATION BOARD MUST DO THE FOLLOWING:

    • Adopt hurricane protection standards/rules as discussed above.
    • Provide copies of the rules and covenants to every association member before October 1, 2024, or post same on the association’s website and send notice to each member at their address used for official notices as to where they can locate them.
    • Adopt rules and regulations governing official record retention.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the September 2024 edition of the “Florida Community Association Journal“.)

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Since When Should the HOA Clubhouse Not Come With Your Home Purchase?

Since When Should the HOA Clubhouse Not Come With Your Home Purchase?

The Florida Legislature Is Called Upon To Act To Put A Stop To Developers Who Require HOA Members To Purchase Their Community Clubhouse And/Or Clubhouse Operations After Turnover

Building property subject to a homeowners’ association (HOA) should not entitle a developer to be in a position to financially gouge the association’s members month after month by using the assessment regime to continually line its pockets. Essentially, that is what association member Gundel argued in court against his association’s developer, Avatar Properties, who built out the Solivita Homeowners’ Association. In this HOA the club facilities, including a spa and fitness center, dining venues, indoor and outdoor pools, parks, tennis courts, and more, were not subjected to the declaration, but rather remained under the exclusive ownership and control of Avatar, the developer, and therefore were not a part of the common areas. This means that as a part of the turnover process, the developer was not required to turn over the club facilities and operations to the now member-controlled HOA but rather retained ownership and control of those facilities. Can you imagine paying hundreds of thousands of dollars for a beautiful new home in a gorgeous community, which includes access to a sprawling clubhouse with dining rooms, spas, and all of the amenities and yet, even though those club amenities are in the middle of the community, they are  owned by a corporation not subject to Chapter 720, Florida Statutes, in any fashion, with the intent being that such club amenities will never be under the control of the HOA’s members?

In the case, Avatar Properties Inc. v. Gundel, Case no. 6D23-170, decided June 22, 2023, by Florida’s Sixth District Court of Appeal, the Court (which, in our opinion, was the correct decision) explained that within the Solivita Declaration, the developer included language for each association member to pay as a part of the annual assessment a sum of money unilaterally determined by the club operator for both club operations and what also was just pure profit as argued by owner Gundel.

The Court explained that the assessment imposed by Avatar (the developer) for the mandatory club membership had two components. One component was the amount required for club expenses to be shared proportionately by each resident. The second component was for a membership fee that represented, according to the Court, an annual profit charge to each owner that was due and payable to Avatar. In fact, if a member did not pay, then their home could even be subject to the lien and foreclosure process by the association.

In the trial court’s summary judgment hearing, the Court ruled in Gundel’s favor, finding that assessments for the club, which constituted profit, were improper because pursuant to Section 720.308 of the Florida Statutes, assessments cannot be levied for profits, but only for expenses.

In response to this case and possibly for other reasons, at least one developer designed a new HOA community with a big difference: it made the clubhouse building and the dirt upon which it was constructed to be a part of the common areas of the HOA. Then through a complicated process laid out in the declaration, the developer provided that the clubhouse operations were not owned by the HOA and that after turnover of control of the HOA to the members, the members must purchase the “operations” of the club at what many consider a grossly inflated price. Should the association members decide not to make the purchase, then the developer maintains the right to sell the club operations to a third party for which the assessment paying members will be at the financial mercy of the club operator forever. No doubt the association membership is already paying for the clubhouse operations through their monthly assessments, and in our opinion to now require the membership to spend millions of dollars to buy those clubhouse operations is just plain wrong!

Let’s break this alternate scheme down. Although previously disclosed in the declaration and its attached club plan, either i) the association membership agrees to purchase the club operations at an inflated price for millions of dollars (and for what—the right to operate their own clubhouse?);  or (ii)  the developer retains the right to sell the club operations to a third party who will then be entitled to charge members assessments to both fund the operations and, like any business, earn a profit for doing what should have been handed over to the membership as a part of the turnover process. After all, what clubhouse operator is going to operate at cost and not expect a profit? Either way, the members lose, lose, and lose.

This type of plan ultimately hurts owners as it will likely create a five figure per member assessment obligation either in the nature of paying back the loan necessary to purchase the clubhouse operations or to be forced to pay a new clubhouse operator. The only money a post-turnover association member should have to pay for their clubhouse operations is the actual money expended for operations (i.e., what it costs to provide the restaurant, spa and pool services, etc.). Common area facilities were never designed or even contemplated to be a continual profit center for a developer or developer-related entity.

Worse still, it appears that these types of schemes have no room for negotiation. The purchase price has been pre-determined by the developer years ago when it initially recorded the community’s governing documents. While the developer can argue it is all disclosed in the governing documents (and therefore proposed buyers/future members have notice of this issue), it takes a fairly sophisticated legal mind to understand how this process is going to work. In this author’s experience, the financial obligations associated with either having to buy the clubhouse and/or the clubhouse operations is often quite a surprise to the members.

In short, requiring the membership to purchase the clubhouse operations based on an unreasonable financial formula requires that the association borrow the millions of dollars necessary to pay the developer. In the end the obligation to pay the loan will be wrapped up in the assessment regime which means, once again just like in the Avatar case, the developer is improperly requiring the association to levy assessments for the developer’s (or third-party club operator’s) gross profit rather than only the legitimate expenses as contemplated by Section 720.308 of the Florida Statutes.

In our opinion, it is evident the Florida legislature needs to protect the citizens of the State of Florida by declaring such schemes unlawful. Clearly, the clubhouse operations should be turned over to the association membership as part of the turnover process, and the membership should not be charged for that which they should already own. If it is the clubhouse structure issue which needs to be purchased because it was not included in the overall purchase price of the houses within the community, then certainly the developer is entitled to recoup its legitimate expenses associated with the buildout; but post turnover the developer should not be entitled to profit at the expense of the association membership. If the developer wants to profit from the clubhouse in the clubhouse operations, then certainly the developer could have included those sums within the purchase price of each member’s home. Their decision not to do so and to artificially deflate the price of a home as a result thereof should not be allowed.

One cannot help but wonder if these types of clubhouse schemes could rise to the level of violating Florida’s Deceptive Trade and Practices Act as set out in Chapter 501, Fla. Stat. In fact section 501.24, Fla. Stat., provides in relevant part that unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful. While the developer can argue that the clubhouse scheme is fully disclosed, it is our opinion the owners can certainly argue that this practice is, at best,  unfair and at worst unconscionable.

Board members and members who live in an association with these types of obligations are strongly urged to discuss their options with competent legal counsel so as to make informed decisions whether to buy the clubhouse and/or the clubhouse operations or consider filing a lawsuit against the association’s developer, arguing as Gundel did in the Avatar case, that this type of profit making activity is unlawful. Also, it must be noted that while the Sixth District Court of Appeal fully agreed with the outcome of the trial court, it certified a question to the Florida Supreme Court regarding the matter. However, the Florida Supreme Court declined review. Therefore, it appears the Gundel opinion remains valid. Nevertheless, it does not go far enough to protect association members from having to purchase their clubhouse and/or clubhouse operations after turnover. Therefore, the Florida legislature needs to do its job and protect the citizens of the state by outlawing this process altogether and requiring an HOA developer to turn over the HOA clubhouse and all of its operations to the association as a part of turnover process.

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Violation Remedies: Self-Help vs. Injunction | Which to Use

Violation Remedies: Self Help vs. Injunction

Which to Use

violations-folders

Imagine this scenario: you are on the board of directors of your association. The association has repeatedly requested that an owner pressure wash their dirty roof to bring it into compliance with the community standards, but the owner refuses to do so. The association has already sent a number of demand letters and even levied a fine and perhaps a suspension of use rights, too, but the owner still will not comply. What is the association’s next step?

  • Is it time to file a lawsuit to compel compliance? Chapters 718 (governing condominiums), 719 (governing cooperatives), a 720 (governing homeowners associations), Florida Statutes, authorize the association to bring an action at law or in equity to enforce the provisions of the declaration against the owner.

or

  • Is it time for the association to use its “self-help” remedy? In fact, many declarations contain such “self-help” language, which authorizes the association to cure the violation on behalf of an owner and even, at times, assess the owner for the costs of doing so. These “self-help” provisions generally contain permissive language, meaning that the association may, but is not “obligated” to, cure the violation.

Assume that the association’s declaration contains both the permissive “self-help” remedy and the right to seek an injunction from the court that orders the owner to clean their roof or else be in contempt of court. Thus, it would appear the association has a decision to make: (i) go to court to seek the injunction; or (ii) enter onto the owner’s property, pressure clean the roof, and assess the costs to the owner. Not so fast! Recent case law from Florida’s Second District Court of Appeal affirmed a complication to what should be a simple decision, discussed in greater detail below.

In two cases decided 10 years apart, Florida’s Second District Court of Appeal decided that an association did not have the right to seek an injunction to compel an owner to comply with the declaration if the declaration provided the association the authority to engage in “self-help” to remedy the violation. Prior to a discussion of the cases, a brief explanation of legal and equitable remedies is necessary.

There is a general legal principle that, if a claimant has a remedy at law (e.g., the ability to recover money damages under a contract), then it lacks the legal basis to pursue a remedy in equity (e.g., an action for injunctive relief). In the association context, a legal remedy would be to exercise the “self-help” authority granted in the association’s declaration. An equitable remedy would be to bring an action seeking an injunction to compel an owner to take action to comply with the declaration (e.g., compelling the owner to pressure wash their roof). A court will typically only award an equitable remedy when a legal remedy (such as “self-help”) is unavailable, insufficient, or inadequate.

This distinction is first illustrated in Alorda v. Sutton Place Homeowners Association, Inc., 82 So. 3d 1077 (Fla. 2d DCA 2012). In Alorda, the owners failed to provide the association with proof of insurance coverage as required by the declaration. The association sent multiple demand letters to the owners, but they failed to comply. The declaration provided, in pertinent part, that “[t]he owner shall furnish proof of such insurance to the Association at the time of purchase of a lot and shall furnish proof of renewal of such insurance on each anniversary date. If the owner fails to provide such insurance the Association may obtain such insurance and shall assess the owner for the cost of the same in accordance with the provisions of this Declaration” (emphasis added). In accordance with the foregoing, the association had the option to purchase the insurance on behalf of the owners and assess them for the costs of same.

However, the association chose instead to file a complaint against the owners seeking the equitable remedy of injunctive relief, asking the court to enter a permanent mandatory injunction requiring the owners to obtain the required insurance coverage. The owners then filed a motion to dismiss the suit arguing that even though they had violated a provision of the declaration, the equitable remedy of an injunction is not available because the association had an adequate remedy at law. In other words, the owners argued that, because the association could have, pursuant to the declaration, undertaken the ”self-help” option by purchasing the required insurance and assessing it against the owners, they had an available legal remedy and, therefore, the equitable remedy sought (a mandatory injunction) was not available to the association. The court, citing to a different case, Shaw v. Tampa Electric Company, 949 So.2d 1006 (Fla. 2d DCA 2007), explained that a mandatory injunction is proper only where a clear right has been violated, irreparable harm has been threatened, and there is a lack of an adequate remedy at law. As the association had an adequate remedy at law (the authority to purchase the insurance on behalf of the owners), the third requirement was not met. Therefore, the court held that the association failed to state a cause of action and dismissed the case. (This case might be decided differently today as it appears the insurance marketplace will not permit an association to purchase insurance for a unit that it does not own, so the legal remedy presumed available to the association would be inadequate).

Similarly, in the recent case of Mauriello v. The Property Owners Association of Lake Parker Estates, Inc., Case No. 2D21-500 (Fla. 2d DCA 2022), Florida’s Second District Court of Appeal considered the award of attorneys’ fees after the dismissal of the association’s action for an injunction. Ultimately, the court held that the owners were the prevailing party as the association could not seek an injunction because the association had an adequate remedy at law. In Mauriello, the owners failed to maintain their lawn and landscaping in good condition as required by the declaration. As such, the association filed a complaint seeking a mandatory injunction ordering the owners to maintain the lawn and landscaping in a “neat condition.” The association’s declaration contained similar language to the declaration at issue in Alorda. The declaration provided that, if an owner failed to perform any maintenance required by the declaration, the association, after written notice, “may have such work performed, and the cost thereof shall be specifically assessed against such Lot which assessment shall be secured by the lien set forth in Section 9 of this Article VI” (emphasis added). In other words, the association had the permissive “self-help” authority pursuant to the declaration.

The facts of this case were complicated by the sale of the home in the middle of the suit. The new owners voluntarily brought the home into compliance with the declaration, and the case became moot. However, the parties continued to fight over who was entitled to prevailing party attorneys’ fees. The association argued it was entitled to prevailing party attorneys’ fees because the voluntary compliance was only obtained after the association was forced to commence legal action. The owners, citing Alorda, argued that they were entitled to prevailing party attorneys’ fees as the association’s complaint never stated a cause of action in the first place. They argued that the complaint should have been dismissed at the outset because the association sought an equitable remedy (mandatory injunction) when a legal remedy was available to the association (exercise of “self-help” authority).

Florida’s Second District Court of Appeal agreed with the owners that Alorda was controlling. The Court explained that, as in Alorda, “the association’s declaration gave it the option of remedying the alleged violation itself, assessing the owner for the cost, and if the owner failed to pay, placing a lien on the property and foreclosing if it remained unpaid.” As such, the association had an adequate remedy at law and could not seek the equitable remedy of an injunction, which was initially sought by the association. Because the mandatory injunction was not available to the association, the association’s complaint failed to state a proper cause of action and, thus, should have been dismissed by the trial court at the outset. Therefore, the association was not entitled to its sought-after prevailing party attorneys’ fee award, which is otherwise granted if a party comes into compliance after the lawsuit is served.

Sections 718.303 (as to condominiums), 719.303 (as to cooperatives), and 720.305 (as to homeowners associations), Florida Statutes, contain similar language that specifically authorizes the association to bring actions at law or in equity, or both, in the event an owner fails to comply with the governing documents of the association. However, neither the Court in Alorda nor the Court in Mauriello addressed the association’s statutory authority to bring an injunction against an owner who fails to comply with the requirements of the declaration, but rather found that the association must use the “self-help” remedy since it was available to cure the violation.

Notwithstanding the Alorda and Mauriello decisions rendered by Florida’s Second District Court of Appeal, past appellate court decisions from other appellate jurisdictions in Florida have permitted community associations to pursue claims for injunctive relief against violating owners so long as a violation of the restrictive covenant is alleged in the complaint. As such, the Alorda and Mauriello cases appear to be departures from the established principle. Additionally, as both decisions came from Florida’s Second District Court of Appeal, the decisions are certainly binding on those associations within the jurisdiction of the Second District, but there has been no indication that other districts will follow suit. However, there is risk that other appellate district courts may be persuaded by the holdings of Alorda and Mauriello.

As such, if your association’s declaration contains a “self-help” provision, and your association chooses to seek an injunction against an owner rather than pursue “self-help,” the board should definitely discuss the issue in greater detail with the association’s legal counsel prior to proceeding.

Reprinted with permission | This article written by Jeffrey A. Rembaum, Esq., BCS will/appears in the July 2022 edition of the Florida Community Association Journal.

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Kaye Bender Rembaum, P.L.