Community Association Law

Pre-Suit Mediation? Or Not?

Pre-Suit Mediation or Not?

A homeowner asked the question on avvo.com if moving from the community would mean he no longer needed to provide his HOA with an offer of pre-suit mediation.Moving would not circumvent the pre-suit mediation requirement because the suit would, I assume, be based on acts that occurred while you were a homeowner.  Pre-suit mediation is not just for homeowners either.  It covers members, vendors, invitees, licensees, and guests.Not all disputes require pre-suit mediation.  FS 720.311(2)(a) provides:

Disputes between an association and a parcel owner regarding use of or changes to the parcel or the common areas and other covenant enforcement disputes, disputes regarding amendments to the association documents, disputes regarding meetings of the board and committees appointed by the board, membership meetings not including election meetings, and access to the official records of the association shall be the subject of a demand for presuit mediation served by an aggrieved party before the dispute is filed in court.

A dispute over a financial obligation or enforcement of a settlement agreement are not subject to pre-suit mediation.  Also, any dispute in which a party seeks an emergency injunction is not subject to pre-suit mediation.  It is important to note that what you may think is an emergency is usually not one in the eyes of the court.

I don’t recommend going to pre-suit mediation without a lawyer.  The HOAs usually have veteran lawyers who are very good at bulldozing over unrepresented parties.

CAMs in Control | CAM

In the past few weeks I have been contacted by community associations regarding issues they have with their community association managers (“CAM”) making decisions on behalf of the association without the board of directors being involved.  This seems to be an alarming new trend as certain CAM firms have started their own maintenance companies and terminate contracts with vendors to give their own companies the contract for services – all without the board’s knowledge or approval.  In one instance a CAM actually refused to allow a board member to vote and provided a legal opinion the board member was ineligible, which is clearly the unlicensed practice of law.  In another instance, which I have seen before, a CAM took it upon himself to take action against an owner despite the board voting to table the issue until they had a chance to talk to the association’s lawyer.

A CAM does not have the authority to make board decisions.  The CAM works for the Board of Directors, not in place of it.  CAM contracts have indemnification clauses, which means the association is liable for the CAMs actions and must pay for a legal defense should someone try to sue the CAM.  Owners cannot sue the CAM in most circumstances because the owners are not in “privity of contract” to sue the CAM, as established in the case of Greenacre Properties. v. Rao, 933 So. 2d 19(Fla. Dist. Ct. App. 2d Dist.2006), meaning the owners are not a party to the CAM contract.  This shield against liability means there are not many consequences for the CAM acting outside their scope of authority.

In my opinion, CAM firms being allowed to set up their own maintenance companies to provide services to the associations is not a good idea.  There is an inherent conflict of interest.  The CAM usually controls the association’s bank account.  The CAM will then make sure their maintenance company is paid, even if the work is not satisfactory.  I have come across instances where the work was not satisfactory, but the board was not aware of the issue because the CAM did not inform the board.  Why would they complain about their own work?

When the associations hire a CAM it is now important to inquire if the CAM firm has its own maintenance company and review the contract thoroughly to see how much control the board will relinquish to the CAM in hiring vendors or other actions which create liability for the association.  Many CAM contracts also provide the CAM with a “bonus” of 10% of the value of the contract for procuring a contract on behalf of the board.  I think it’s more of kickback then a bonus, but this is a common practice in Florida.

Selecting a CAM is an important task for associations.  It is up to the board of directors to perform their due diligence and make sure the contract is clear regarding decision-making activities.  The actions of an overzealous CAM could be costly and lead to litigation against the association.

HOA Emergency Powers – Legislative Update FS 720.316

There is trouble brewing on the horizon and it doesn’t come from a hurricane, but the effects will be felt after a hurricane or some other natural disaster passes through.  I’m talking about the provisions in House Bill 807, which is now state law (FS 720.316) effective July 1, 2014, which give homeowner associations emergency powers in case of a natural disaster.  Those powers include levying special assessments, borrow money or pledge assets as collateral without a vote of the membership.  You want to know why I think it’s a bad idea? Subsection (2) of the law states the authority granted in subsection (1), which I stated above, is “limited to that time reasonably necessary….”  Any time you see the word “reasonable” in a statute it will take a judge, at least two lawyers and close to $200,000 or more in legal fees and expenses to determine what is “reasonable.”

Why would the Florida Legislature think giving HOAs a free pass on this is a good idea?  Do they really think life in a HOA is perfect for most people and all will be okay? These are the same people who could not get a bill passed to allow for a state agency to regulate HOAs — they should know giving them more power will only add to the corruption and abuse that goes on in an unregulated industry.  My only guess is someone spiked the refreshments on Capitol Hill. This is why my friend, Jan Bergemann of CyberCitizens for Justice, thinks the HOA statute is the “Attorney Employment Act.”  It will surely keep me busy for years to come.

Let’s revisit this after a hurricane hits Florida.  I would like any HOA or member of a HOA hit by a hurricane to let me know how this new law worked out for you.  Please prove me wrong.

And speaking of new laws….we now have a challenge under the Florida Constitution for retroactive application of a new law to an existing contract.  The law doesn’t say it is intended to be applied to existing associations.  In the section authorizing special assessments, it comes slightly close. In subsection (1)(j) with “Notwithstanding a provision to the contrary, and regardless of whether such authority does not specifically appear in the declarations…”  Wait a minute — the first part says the HOA can’t do it if there is a provision in the association documents prohibiting it, but the part after the comma says the HOA can regardless of what’s in the governing documents!  More billable hours for all attorneys!

This one really disappoints me……

Community Association Law 2014 Legislative Updates

The information below is copied word for word from the summary of House Bill 807 located at http://www.flsenate.gov/Committees/BillSummaries/2014/html/728.  I will discuss each revision in the next coming weeks.
The provisions related to condominium associations include:
  • Authorizes the associations to enter an abandoned unit to inspect the unit and adjoining common elements, to make specific repairs, and to maintain the unit, and permits the association to charge the unit owner for expenses incurred by the association,
  • Provides the circumstances in which a unit may be considered abandoned;
  • Provides that the insurance responsibility of the association or unit owners for reconstruction, repair, or replacement in the absence of an insurable event shall be determined by the provisions of the declaration or bylaws;
  • Permits board and committee members to participate, including voting, in a meeting via telephone, real-time videoconferencing, or similar real-time electronic or video communication, and for such participation to count towards a quorum;
  • Provides that the previous owner does not include an association that acquires the title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present unit owner’s liability for these costs associated with the collection process is limited to the amounts that accrued before the association acquired the title to the delinquent property.
  • Prohibits condominium associations from recording a termination of condominium that failed to receive the required approval (80 percent of the voting interesting and 80 percent of the original principal amount of outstanding recorded mortgage liens of timeshare estates in the condominium, unless the declaration provides for a lower voting percentage). It provides that a new attempt to terminate the condominium may not be proposed at a meeting or by solicitation for joinder and consent for 180 days after the date the failed plan was first given to all unit owns;
  • Repeals the Community Association Living Study Council; and
  • Extends the time period to be classified as a bulk buyer or bulk assignee from July 1, 2015 to July 1, 2016.
For cooperative associations, the bill:
  • Revises the financial reporting requirements by increasing from 60 days to 90 days the time to prepare a financial statement, or to contract with a third party to prepare the financial statement;
  • Specifies the type of financial reporting required based on the association’s total annual revenue amounts;
  • Limits the financial reporting requirement, for associations of fewer than 50 units, regardless of the association’s annual revenues, to the preparation of a report of cash receipts and expenditures, unless otherwise required by the declaration or other recorded governing documents;
  • Provides that persons who have been suspended or removed by the division or who are delinquent in the payment of any monetary obligation due to the association are not eligible to be a candidate for board membership and may not be listed on the ballot; and
  • Provides for the removal from office of a director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association’s funds or property.
In regard to homeowners’ associations, the bill:
  • Requires that meetings of the board of directors of a homeowners’ association and meetings of the association’s membership must be held at locations that are accessible to physically handicapped persons; and
  • Provides that an association does not have to provide members with copies of an amendment to the governing documents after it is approved by the membership if a copy of the proposed amendment was previously provided to the members before the vote on the amendment and the proposed amendment was not changed before the vote.
In regard to condominium and cooperative associations, the bill requires outgoing board or committee members to relinquish all official records and property of the association in their possession or control to the incoming board within five days after the election. The bill provides that an outgoing board or committee member who violates this requirement is personally subject to a civil penalty by the Division of Florida Condominiums, Timeshares, and Mobile Homes. It also prohibits a board member from voting by e-mail.
For cooperative and homeowners’ associations, the bill authorizes boards to exercise specified emergency powers in response to the declaration of a state of emergency, including the authority to implement a disaster plan, mitigate damages, and borrow money with the approval of the membership.
In regard to condominium, cooperative, and homeowners’ associations, the bill provides that unit owners may consent in writing to the disclosure of contact information to which other owners are prohibited from having access.