New Neighborhoods–The Hierarchy of Laws

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

The Hierarchy of Laws

Dear Poliakoffs,

When deciphering condominium documents and rules and regulations promulgated by the board, when the documents are out of synch – i.e., the articles and bylaws say different things, which document controls?  Signed, C.O.

Dear C.O.,

Great question, and one that confuses a lot of people.  Here’s how it works.

Our system in the United States is a system of laws, and as a natural result there has to be a hierarchy of which laws are the most important, and therefore trump other laws promulgated either by governments or created privately (such as covenants contained in contracts).  At the top of the legal food chain is always the supreme law of the land—the United States Constitution, and then the laws created by the federal government.  These include treaties, trade agreements and laws passed by the legislature.  Next would be state laws—the Constitution of the State of Florida and Florida statutes (such as sections 718 and 720, which govern condominiums and HOAs).  Below that are local laws and ordinances that were in effect at the time the condominium or HOA documents were recorded (assuming that those ordinances are not preempted by the laws above them).

The next level is the private, contractual laws; the declaration of condominium (or, in the case of an HOA, the covenants, conditions and restrictions), then the articles of incorporation, the bylaws, and last the rules and regulations.  Rules created by a board may not circumvent rights granted to unit owners by the documents that are of greater importance, and they certainly cannot violate any federal laws.  It’s also important to understand that, whether referenced or not, state statutes are considered to be engrafted onto the contract (the declaration itself, and all the related documents).

So here’s a practical example.  Let’s assume that a board of directors passes a law that states that no women may purchase a unit on the property (we’re intentionally choosing an extreme example).  To determine if that rule were valid (and ignoring the fact that rules must be reasonable, and this one certainly isn’t), you would first look at the association documents to see if there is a superior clause that controls.  Many documents do in fact have anti-discrimination language, but it’s not universal.  Next you would look to state law (the rule would almost certainly die at this step, as most states have their own gender protection laws), and if that didn’t prevent the rule you could go as high as the laws of the United States (and in this case equal protection would undoubtedly invalidate the regulation).

Now, as you asked, let’s assume that the board instead convinced the membership of the association to amend the bylaws to achieve the same discriminatory outcome.  You would again work your way up through the association documents, one by one.  Do the articles of incorporation say anything about this issue? Probably not—the articles of incorporation generally set up the actual entity that controls the property and talks about basics like how many board members must serve and when the annual meeting should be held.  The declaration, however, might very well contain a clause that the association may not discriminate against owners, and if so that would trump the bylaws, a lower document in the hierarchy.

Now, at the risk of confusing the issue even more, there is a question as to whether statutory amendments passed after the condominium and HOA documents were recorded apply to the association.  The answer to that question depends on whether the statutory amendments are procedural (affecting simply how laws are carried out) or substantive (an actual change to rights or regulations).  The Constitution prohibits states from passing laws that impair existing contract rights.  So, for example, one could debate whether a state law that prohibits an association from restricting leasing of units would be applicable.  If the no-leasing provision was in the declaration before the legislature passed its law, then the change is arguably an impairment of contract (with the contract being the actual declaration of condominium).  Some documents contain language that affirms that they are automatically modified by all legislative amendments.  Lawyers refer to such clauses as “Kaufman” language, after the case that stated that if such a provision is contained within the document, then legislative changes do not impair the existing documents because applying these changes is strictly an interpretation of the document.  Told you it was confusing!  Unfortunately, the law isn’t easy, and that’s why having good counsel is critically important to every association.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is a senior counsel at Sachs Sax Caplan P.L.  Email questions to condocolumn@gmail.com.  Please be sure to include your hometown.

Posted in Bylaws, Covenants Tagged , , ,

New Neighborhoods–Clean Title, Common Element Repairs and Virtual Board Members

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Clean Title, Common Element Repairs and Virtual Board Members

Dear Poliakoffs,

I am contemplating buying a condominium unit from a condominium association that acquired title by foreclosing on its lien filed for non-payment of the maintenance assessments.  The realtor advised me that the unit once had a mortgage on it, but the association’s attorney successfully had the trial court extinguish the mortgage due to the unit mortgagee’s failure to timely foreclose on the mortgage that was in default.  If I close on the unit and obtain title insurance, is my title secure?  Signed, D.T.

Dear D.T.,

The situation you described should raise a large warning flag.  In an effort to put pressure on unit mortgagees (the banks) that are not actively pursuing foreclosures on their mortgages that are in default, some attorneys have persuaded trial judges to extinguish the mortgages, conveying title to the association free and clear of the mortgage.  Often referred to as “Mortgage Terminator Lawsuits”, lawyers bringing these actions plead various theories, from mortgage abandonment to quiet title and, often, equitable relief.  The primary problem is that many title insurance companies do not recognize these actions as being valid, and they have advised those who write title insurance on their properties not to do so without expressed written approval of the title insurance company.  While this area of law is still unsettled, Florida’s Supreme Court has provided some evidence that these lawsuits might ultimately be rejected, holding that “safeguarding the validity of such contracts and assuring the right of enforcement thereof, is an obligation of the courts that has constitutional dimensions.”

Based upon our analysis of the direction the courts are going in this area, we would caution readers not to acquire title without title insurance from a recognized, reputable underwriter which, given these facts, may be impossible to obtain.

Dear Poliakoffs,

I love your weekly column and have learned many useful things over the decades.  I live in a small condo association with 65 individual houses.  It’s a unique little community that generally runs well.

Lately, to conserve funds, there has been a “push” by management and the board to assign the burden of common element repairs onto the owners adjacent to the element needing repair.     One of the reasons I purchased a condo is because it relieved me, as an individual owner, of responsibility to repair common elements.  The cost is not the issue, but whether individual condo owners can be forced to repair pre-existing conditions and defects.  Our docs do not address this issue beyond the usual legal description of common elements and the association’s fiscal responsibility for the same (supported by the monthly condo fees & special assessments).

Am I responsible to bear these types of repairs personally?  Signed, O.S.

Dear O.S.,

No. Individual unit owners are not responsible for repairing the common elements.  In fact, the Florida Condominium Act expressly states that, “a unit owner does not have the authority to act for the association by reason of being a unit owner.”  The Condominium Act imposes the burden for maintaining the common elements on the association, which in turn prorates the cost among the unit owners as assessments based upon each unit owners share of ownership as stated in the declaration of condominium. The only exception to this law is the case of limited common elements; that is, common elements which are reserved for the exclusive use of one or more owners, and then only if the declaration imposes the obligation on those owners.

Dear Poliakoffs,

Three of our newly elected board members have purchased other properties and are in the process of moving from here to other communities. They are not selling their condos in our community. Do board members have to live on premises, especially the president, to be able to keep their position on the board?  Signed, J.B.

Dear J.B.,

None of the shared ownership acts (condominium, co-operative, or HOA) require a unit owner to live in the community as a condition of their qualifying to run for the board; and, if elected, serving.  It is quite common in South Florida, especially with the large volume of snowbirds, for board members to live in other communities, and even in other states.  The Act even allows board members to attend meetings virtually through teleconferencing.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New NeighborhoodsThe Consumers Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is a senior counsel at Sachs Sax Caplan, P.L.  Email questions to condocolumn@gmail.com.  Please be sure to include your hometown.

Posted in Board Meetings, Common Areas, Condo Associations, HOAs, Homeowner's Association, Owner Rights, Property Maintenance Tagged , , ,

New Neighborhoods–Workshop Meetings and Emotional Support Animal Guidelines

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Workshop Meetings and Emotional Support Animal Guidelines

Dear Poliakoffs,

I recently read a newspaper column responding to a question of whether the board of an HOA can meet in a closed workshop meeting, before it convenes its open board meeting.  The columnist responded that both the HOA and Condominium Acts prohibit closed workshop meetings.  Is that the case?  Signed, C.D.A.

Dear C.D.A.,

The answer differs slightly depending on whether the property is a condominium or an HOA.  In a condominium, meetings of the board, as well as committee meetings, must be noticed and open to unit owners, with an agenda posted at least 48 hours in advance.  However, there are exceptions to this rule.  Meetings of a committee that does not take final action on behalf of the board can be closed if the committee does not consist of a majority of the directors, and if the bylaws have been amended to allow such closed committee meetings.  However, if the committee is granted the authority to take final action on behalf of the board, or make recommendations to the board regarding the association’s budget, then the committee meeting must be open to the unit owners.  Also, the board can meet in a closed session for two specific purposes:

a.         Meetings between the board or a committee and the association’s attorney, with respect to proposed or pending litigation, if the meeting is held for the purpose of seeking or rendering legal advice, and

b.         Board meetings held for the purpose of discussing personnel matters.

While the HOA laws are basically the same as the Condominium Act, there are some small differences.  Meetings of the board at which a quorum is present must be open to the members, except that, as in condos, meetings with the association’s attorney and meetings to discuss personnel matters can be closed.  In the case of committees of a homeowner’s association, the HOA Act only mandates that committee meetings where a final decision will be made regarding the expenditure of association funds and architectural review committees be open.  Thus, if an HOA committee does not contain a quorum of the board, and if it is not making a decision regarding the expenditure of association funds or architectural contacts, it appears the committee can meet in closed session.

Dear Poliakoffs,

I am trying to buy a Villa at a community in Boca Raton, Florida.  I have an emotional support dog, which they are giving me a hard time about.  I have forwarded to them everything that they have asked for.  I had my doctor write them a letter as to why he has recommended that I get an emotional support animal, and why I need one. I also am on Social Security Disability.

They are telling me that I need a letter from a psychiatrist stating what my disabilities are.  Under the HIPPA Compliant Laws, I do not have to reveal my medical status.  Also, I do not go to a psychiatrist, and I do not take mind-enhancing drugs.

My dog has literally saved my life, and without him, my life is worthless.  He has gotten me through very hard times in my life, he has given me emotional support, amongst other things.

Because of their lack of cooperation, my contract has expired, and the seller (which is an investment company) does not want to renew my contract.  They have been asked to send to my realtor the condo documents, and as of yet, this has not been done.  (I signed this contract on March 13, 2012).  They have been delaying this process on purpose because of my dog, and also from what I understand, they have other people interested in this property for more than what I was going to pay.

This was going to be a cash sale.  I am literally getting sick over this, suffering from anxiety, stress, and my blood pressure has been escalating.  I need your help.  Please let me know what I can do.  This is the only Villa that I can afford, and I have friends that live there, which would make me feel more comfortable.  I also know that there are dogs already living in the community.  Signed, W.M.

Dear W.M.,

A Federal Court dealing with the very issues you raise provided specific guidelines of what information a no-pet property is allowed to request from a prospective owner to establish the need for an accommodation to keep a service or emotional support animal.  If requested by the association, the owner must share the nature of his or her infirmity (unless it is visibly obvious), and how an emotional support animal would ameliorate the cause of his or her handicap. In addition, the Court ruled that the association is entitled to inquire about the treating physician’s background and experience in treating the type of disability that necessitates keeping an emotional support animal. That doctor must send a letter advising the association the extent to which you have been in treatment and why the emotional support animal is necessary. So, in this case, you do have an obligation to reveal certain medical information if you want the requested accommodation.

The attending physician does not have to be a psychiatrist. However, he or she does have to demonstrate knowledge and experience in treating the type of problems that will be ameliorated by your emotional support animal.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Board Meetings, Condo Associations, FHA, HOAs, Homeowner's Association, Pets Tagged ,

New Neighborhoods–MRTA, Emotional Support Animals and Hard Flooring

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

MRTA, Emotional Support Animals and Hard Flooring

Dear Poliakoffs,

In response to a reader’s question concerning whether the Marketable Record Title Act (MRTA) extinguished Covenants, Conditions and Restrictions older than 30 years, you responded “Yes, indeed, CC&Rs that underlie planned developments are extinguished after 30 years unless steps are taken in accordance with the law to extend the expiring covenants; notwithstanding any automatic extensions contained within the covenants.”

I have owned a condominium unit over 32 years.  Does the MRTA impact my condominium?  Signed, P.T.

Dear P.T.,

No. The Marketable Record Title Act (MRTA) does not extinguish covenants that are part of the declaration of condominium because the deeds conveying title to condominium units reference the official records book and page to the recorded covenants.  That said, it is possible in some condominiums, where the association holds title to shared property that is not submitted to condominium ownership but is protected by its own CC&Rs, that those covenants would be extinguished if the requirements of MRTA are not met.

Dear Poliakoffs,

In Florida, if a condominium owner is willing to rent to a tenant who has an “emotional support dog,” can the association vote to disallow any dogs on the premises that are not owned by unit owners?  There are two or three other owners’ dogs in the building, and the unit owner who has the tenant is fine with the dog living in his unit, but the board voted not to allow the dog.

I would very much appreciate the answer to this question and a legal reference perhaps.  Signed, G.B.

Dear G.B.,

There are arbitration decisions from Florida’s Division of Land Sales, Condominiums, and Mobile Homes that have upheld condominium rules and regulations disallowing tenants from keeping a pet, even though unit owners are permitted to do so. That said, assuming that leasing is permitted in general, the question of whether a tenant who is handicapped is allowed to have a service or emotional support animal would, in our opinion, be subject to the Fair Housing Act’s requirements that reasonable accommodations be made in rules, policies, practices and services to afford handicapped individuals full use and enjoyment of the premises.  That is, even tenants must be allowed to keep a service animal if that animal falls within the requirements and regulations of the FHA.

Dear Poliakoffs,

My husband and I recently moved to the US. We bought a second-floor condo unit, and we removed the carpets and installed laminate flooring. Being new here in the US, we were unaware that this required condo association approval. We had not realized that our condo documents contains a clause which says “unless … meeting the sound insulation specifications established from time to time by the Board, hard and/or heavy surface floor coverings, such as tile, marble, wood, and the like will not be permitted in Units…All areas within a Unit…are to receive sound absorbent, less dense floor coverings, such as carpeting.”

After being made aware of this requirement we promptly put in an application to the board for approval of our laminate floors, which they turned down. We appealed and told them we were ready to meet their ‘sound insulation specifications’ (which they ultimately have been unable to articulate). They asked for our sound insulation proposal, which we submitted, but after that sent us a lawyer’s letter saying that we need to remove the laminates or they will file for a petition for arbitration.

May I ask if it’s the duty of the board to establish the sound insulation specifications, based on the clause in our condo documents? What do you think are our options?

We would really appreciate your advice.  Signed, K.Y.

Dear K.Y.,

Most condominiums have language in their declaration that requires all wood, tile and stone flooring surfaces to be installed over specified sound insulation. This requirement is designed to preclude sounds from units that sit on top of one-another from causing a nuisance to those below. In your case, as also sometimes happens, the association documents ban all floor coverings other than carpet. Even though your documents state that the board may establish soundproofing specifications, the natural state in your association is to only allow carpeting.  While the board cannot arbitrarily deny installation of your hard surfaces if they have allowed other unit owners to install them, they appear to be able to mandate that only carpeting can be used.  It’s hard to say this definitively without analyzing the entire document, but it seems fairly likely that the board is not doing anything improper.  This is why it is absolutely critical before anyone buys a home in an HOA or a condo to read their documents to see if there is any language that would be objectionable to them as homeowners.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Condo Associations, Condo Rules, HOAs, Homeowner's Association, Pets Tagged ,

New Neighborhoods–Alternative Dispute Resolution

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Alternative Dispute Resolution

Dear Poliakoffs,

What is the difference between mediation and arbitration and is it true that I have to take part in mediation or arbitration before I can sue my condominium association?  Signed, A.T.

Dear A.T.,

Mediation and arbitration are both forms of alternative dispute resolution (ADR)—ways that a dispute between parties can be solved without resorting to costly litigation.  Before we address the specifics of how ADR works in condominiums, it would be helpful to explain the difference between mediation, arbitration and lawsuits.

Obviously, the first form of “dispute resolution” is to try and handle disputes directly, by having an open discussion between the two parties.  A friendly resolution is free and relatively stress free if the dispute has limited facts and both sides are willing to have an honest talk about the issues and are dedicated to solving problems.

Assuming that the direct method hasn’t worked, the next and least aggressive form of ADR is mediation.  A mediation (which can be either mandatory or voluntary) occurs when the two parties sit down, usually with their attorneys, in front of a trained mediator.  A mediator’s job is to help the two sides air their grievances in a productive manner.  Mediators are not judges—they do not decide what is right or wrong, or what the true facts of the dispute are.  Instead, mediators assist parties in reaching their own bargain, usually by serving as a shuttle between the two sides as they negotiate settlement terms.  Mediations are non-binding, unless the parties sign a settlement agreement at the end of the process.  Statistically, mediation is an extremely effective form of dispute resolution, and good mediators help the two sides come to an agreement that neither party is entirely happy with (which ordinarily signals a fair negotiation).

In an arbitration, an arbitrator will serve as a private judge who will determine which side is “right” and wins the dispute.  Both sides will present facts to the arbitrator (usually through attorneys, just as in a courtroom).  Witnesses may be interviewed, and documents reviewed.  Eventually the arbitrator will come to a conclusion of fact, just like a judge, and award relief to one or the other party.  Arbitrations can be either binding or non-binding—a non-binding arbitration is essentially a professional advisory opinion on the likely outcome if the dispute were to go to trial.  A binding arbitration, in contrast, is essentially a private, less costly form of courtroom litigation where both parties have agreed to abide by the arbitrator’s final decision.

Last, of course, is litigation, where a dispute is brought in a state or federal courtroom where judges or juries are presented facts (by attorneys, in large disputes) and render a decision that is binding on the parties and may only be appealed if there is an argument over an issue of law.  The fact finder’s determination of the truth of the dispute is generally written in stone after a trial ends.

Now, in the condominium arena, mediation is optional across the board.  Arbitration is mandated whenever there is a disagreement between two or more parties that involves either:

(a)        the authority of the board of directors, under the Condominium Act or condominium documents, to require any owner to take any action, or not to take any action, involving the owner’s unit or the appurtenances thereto; or to alter or add to a common area or element; or

(b)       the failure of a governing body, when required by the Act or condominium documents, to properly conduct elections, give adequate notice of meetings or other actions, properly conduct meetings, or allow inspection of books and records.

Expressly excepted from the requirement of non-binding arbitration are any disagreements that primarily involve title to any unit or common element, the interpretation or enforcement of any warranty, the levy of a fee or assessment, the collection of an assessment, the eviction or the removal of a tenant from a unit, alleged breaches of fiduciary duty by one or more directors, or claims for damages to a unit based upon the alleged failure of the association to maintain the common elements or condominium property.

It is also important to note that, prior to a board taking any action against a unit owner for an alleged violation of the Act or documents, the board must provide the unit owner with advance written notice of the specific nature of the dispute, a demand for relief and a reasonable opportunity to comply or to provide the relief, and notice of the intention to file an arbitration petition or other legal action in the absence of a resolution of the dispute.

So the short answer is that mediation is optional, but highly encouraged, as it is a very cost effective way to settle complex disputes and has an extremely good success rate.  Arbitration is mandated in certain specific instances, and in every other situation litigation is fair game.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Alternative Dispute Resolution Tagged

New Neighborhoods–Covering Non-Paying Owners and Confidential Personnel Information

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Covering Non-Paying Owners and Confidential Personnel Information

Dear Poliakoffs,

My HOA in Jupiter has informed us that, although this year our quarterly assessments will not increase, because many delinquent owners do not pay their rightful share we may have to pay a “special assessment” toward the end of the year in order to make up for the “dead beats.”

Now, the powers that be will not take anyone here to court for any reason, stating that “the association does not have the money,” although we seem to doing just fine in our reserve account.  The board does not enforce rules–if a condo rule is not being followed a letter is sent but the owner may or may not abide by the “request” as nothing is done to change the situation.  This of course includes the delinquent quarterly assessments.   I would like to go to the next meeting and state that this neither fair nor legal.  Is this indeed legal?  Signed, P.M.

Dear P.M.,

According to a recent newspaper article, 23% of Florida’s homes are delinquent in their mortgages or are in foreclosure, the most of any state. Of course, owners who are delinquent in paying their mortgages often do not pay their association fees, either.  Your experience, and the hardship placed on those unit owners who are paying their assessments, is impacting millions of residents in the state.  Boards that do nothing are only compounding the problem.  It is certainly legal, and in fact common, for an association to specially assess paying owners to cover delinquencies.  However, it is arguably a breach of the board members fiduciary duty to in turn ignore the non-paying owners and make no attempts to collect their maintenance payments.

As property values decline due to the failure to maintain the common areas and overall appearance of the community, all unit owners suffer.  For example, we know of a case where a unit owner who owned her home “free and clear” lost the home to her association when she was unable to pay a large special assessment to cover delinquent unit owners. It is almost always in the association’s interest to foreclose on delinquent unit owners as early as possible, take title and rent out the units until the banks get around to foreclosing. There are even cases in which the banks have extinguished their mortgages, allowing associations to take clear title to the units. While bringing lawsuits against non-paying owners carries a cost, the cost to the community of ignoring the problem is much greater.

The sad reality is there isn’t any short-term solution. The key to condominiums and HOAs surviving the current economic crisis is having boards in place that make prudent business decisions which benefit the unit owners, which includes aggressively pursuing non-paying owners.

Dear Poliakoffs,

Unlike the previous year, a 2012 proposed budget for my townhome association was recently presented to homeowners at the annual budget meeting without a breakdown of the present management company salaries for office and maintenance personnel.

The total cost of the 2012 management contract was increased by $20,000 from 2011.  When asked questions about the increase and why a breakout was not provided, the board claimed that they decided to budget and present the cost of the management services contract as a lump sum, because homeowners would be confused by providing more detail, like fringe benefits, etc.

When three or four homeowners pressed for clarification and asked for more specifics, the board held firm and proceeded to approve the increased budget without sufficiently breaking out personnel costs.  Homeowners who wanted more specific budget information were unprofessionally directed to individually send the property manager an email message requesting the break out of the personnel and management services contract costs, and the office staff would compile it for them.

Based on the scenario described above, was the board operating within the spirit of the statute outlined below?

If not, what action (if any) can homeowners take to report the violation?  Signed, B.D.

HOMEOWNERS ASSOCIATIONS

§720.303(5)(c), F.S.

  • Clarifies that “personnel records” are not accessible to owners; however, written employment agreements with an Association employee or budgetary or financial records that indicate the compensation paid to an Association employee are accessible to owners

Dear B.D.,

The Condominium Act was recently amended to exclude the salaries of individual employees from the “official records,” limiting unit owner access to a bulk line item for the manager, management company employees and association employees.  Thus far, the HOA Act has not followed suit and, as cited by you, the HOA Act allows the association members the right to inspect the financial records including the salaries paid to its employees.  However, it sounds as if your board was not preventing access to this information, they simply were not comfortable publishing it in the annual budget.  So what they are doing (directing owners to send a document request to the management office) is probably not illegal.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Collections, Condo Associations, Delinquencies, HOAs, Homeowner's Association, Owner Rights Tagged , , , , , ,

New Neighborhoods–Responsibility for Pipe Maintenance and Non-Owners on Board

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Responsibility for Pipe Maintenance and Non-Owners on Board

Dear Poliakoffs,

First, let me tell you that your column is always informative, and condo owners appreciate your efforts.  Now it is my turn to write to you looking for your input.  I need information and advice ASAP if I’m going to go to mediation, and spend more money.

On February 14, 2012, our thermostat read a message that indicated that our AC system was malfunctioning, and to call technicians.  We did that, and after researching where the problem was, the technicians said it was a leak in the copper pipes that go from the roof, where our compressor is located on our seven-story condo, to our air handler inside our first floor condo unit.  This copper pipe is for the exclusive use of my condo.  Both the compressor and air handler belong to me.  The whole system is about 9 months old, fairly new.  The technicians disconnected and removed our air handler, cut the drywall/sheetrock, and used their probes and meters to locate the leak.  The leak was not in our first floor unit, so technicians went to the second floor unit, performed the same chores (air handler disconnect & cut in drywall), and again found no leak.  The leak was finally found in a third floor wall inside the closet where the third floor air handler is located.  The large copper pipe was the culprit.  Repair was made to the tune of $3,350.00.

I filed a claim with my insurance company.  Yesterday I received a letter from the insurance company denying my claim, stating that the Florida Statute 718.111 overruled the condo association by-laws.  Our condo association by-laws indicate that “unit owners are responsible for the maintenance and repair of the mechanical equipment such as heating and air conditioning systems, and all other property not constituting part of the common elements.”  Therefore, the insurance company claims that the association is responsible for the AC system provided to the unit owners.  Keep in mind the AC system is mine, as I purchased it and it was properly maintained, and not provided by the condo association. What specific paragraph, sub-paragraph in FL Statute 718.111 covers this subject?

Seems to me that I remember not too long ago the Florida condo law changed and made the AC systems the responsibility of the condo associations.

I have 21 days from the date of the letter received to participate in a non-binding mediation.  My insurance company does not cover loss for wear and tear, marring, deterioration, inherent vice, latent defects, or mechanical breakdown–therefore they are not paying a penny.

I’ve given a copy of the insurance company letter to the condo association board president to look into this matter from their perspective.  Signed, R.P.

Dear R.P.,

The Condominium Act distinguishes between the maintenance of a unit component, including the AC compressor, the air handling unit and the pipes servicing only your unit, and repair and/or replacement of the same caused by a casualty. The Condominium Act does provide that unit compressors, even those placed on the roof or ground, are the responsibility of the association in the event that they are damaged by a casualty (hurricane, fire). Your condominium documents state that maintenance and repair is a unit owner responsibility. From what you have stated, even though the insurance company advised that the association is responsible for the cost of the repair, unless you can show that the break in the pipe was caused by a casualty, this sounds like a maintenance question for which you are in fact responsible.

Dear Poliakoffs,

The board of directors to our townhome development association is elected at the annual meeting.  Our by-laws state that the legal owner on record with the property appraiser’s office can vote and/or run for office.  As a spouse of a legal owner, but not listed on the property appraiser’s record, am I eligible to run for office?  Signed, P.M.

Dear P.M.,

Most shared ownership by-laws provide that only record title owners (that means the individuals whose name(s) appear on the deed of record) are eligible to serve on the board and vote.  We are aware of a few documents which allow non-owners to serve, if elected, and provide that the spouse of an owner can qualify to run and serve.  Other than voting for the board, a unit owner can give their proxy to a non-owner to vote at association meetings.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Board Elections, Bylaws, Common Areas, Condo Associations, Insurance, Property Maintenance Tagged , , ,

Back in the Saddle…

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So it’s been a month since I last posted an article, but I have a pretty good excuse–I’ve been studying for, and last week have taken, the Florida Bar Exam.  Sorry for the lack of content, and from now on I should be back to posting weekly articles for your consumption.  Thanks for your patience!

Ryan

Posted in Shared Ownership Guide

New Neighborhoods–Charging Wrong Maintenance Fees and Closed Board Meetings

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Charging Wrong Maintenance Fees and Closed Board Meetings

Dear Poliakoffs,

My condominium association issued monthly assessment fees for 2012 to commence January 1, 2012.  Upon review, I concluded that all the fees were incorrect for the 140 unit owners.  I contacted the manager that calculated the numbers as well as the president of the association prior to the budget meeting and compared numbers.  I was assured that they would re-evaluate their numbers.  At the budget meeting they did announce that there were some corrections made to the original numbers.  The budget was passed by the directors and subsequently mailed to all owners.  My analysis revealed that all 140 unit owners are now going to pay an inaccurate sum.   The new numbers were so inaccurate that the owners called the office and strongly complained.   The management company posted a new set of figures on the bulletin board and apologized for their error, however, the new numbers are still wrong.  To what authority may a complaint be registered, as in my view, the owners are being forced to pay an incorrect fee.  Signed, H.G.

Dear H.G.,

It’s a little hard to tell from your letter exactly why the fees are incorrect.  Are the fees incorrect because there are individual line items in the budget that are miscalculated?  Or are they incorrect because, despite an accurate budget, management is miscalculating the share owed by each owner?

If the budget itself were wrong, the primary recourse would be to have the board again re-notice a budget meeting and approve a new, correct budget.  The board can do this at any time, as long as they follow the “budget meeting” notice requirements in the Condominium Act.  If the board will not take action, a campaign to educate owners may be worthwhile to help put pressure on the board and management.

If it’s a calculation issue, know that once the budget is promulgated by the board the unit owners’ share of the common expenses must be prorated exactly as it is stated in the Declaration of Condominium and cannot be changed without the written consent of 100% of the unit owners and all lien holders of record.  The board has no option to do otherwise.  If the manner of sharing the common expenses is misstated, it must be changed.  If the board or management refuses, you should file a complaint with the Division or seek help from the Ombudsman.

Dear Poliakoffs,

Our condominium board has been meeting illegally.  Closed meeting notices were posted in which the agenda stated “discussions regarding personnel” and “new business”.  On another occasion I walked into our meeting room to find a majority of the board members present as well as a representative from management.  No meeting notice had been posted and no one objected when I remained.  During this meeting the board interviewed a cleaning company and conducted other condominium business.  What is the legal definition of “personnel” for a closed meeting?  How are minutes handled for a closed meeting?  What should be included, and is an owner entitled to review the minutes?  Signed, E.S.

Dear E.S.,

As a general statement meetings of the board at which a quorum is present are open to all unit owners.  There are two exceptions to this rule.  The requirement that board meetings and committee meetings be open to the unit owners does not apply to: (a) meetings between the board or a committee and the association’s attorney, with respect to proposed or pending litigation, if the meeting is held for the purpose of seeking or rendering legal advice, or (b) board meetings held for the purpose of discussing personnel matters.  The Act does not define the term “personnel.”  The Merriam-Webster dictionary defines the term as a “body of persons employed.”  While there have not been any case or arbitration decisions on the legislative content, We believe it will ultimately be determined that closed meetings to discuss personnel will be narrowly construed to mean year-end evaluations, salary issues, hiring/firing decisions and disciplinary issues.  The Act does not permit closed board meetings to interview management companies.  If a condominium has amended its By-Laws to permit committees to meet in closed sessions, it would be possible for a committee to interview potential managers and/or management companies on condition that the committee was not empowered to make the final hiring decision.

Minutes should be taken and kept for closed board meetings, but they would be kept confidentially, for management and the board’s eyes only—otherwise, it would defeat the purpose of having closed board meetings in the first place.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Shared Ownership Guide

New Neighborhoods–Choosing an Insurance Agent and Exclusive Use Rights

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New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Choosing an Insurance Agent and Exclusive Use Rights

This is the time of year when many associations are considering the renewal of their insurance policies, one of the largest line items in any budget.  With other large contracts, your manager might prepare a specification of work and put out a request for proposal, and three or more contractors would submit bids with their pricing.  But that’s not how it works in the insurance world for condos and HOAs, and this confusion causes a lot of associations to make questionable decisions when it comes to their insurance.

First, understand that, for many large condominiums, especially those on the ocean, you may only have one or two insurance options—QBE and Citizens (depending on QBE’s rates for your property).  By law, insurance companies must provide the same quote to every agent for the same property at the same valuation.  So there is no actual benefit to asking several different agents to quote the insurance on your property, at least with the big carriers.  Further, these companies won’t even let the agent quote your property until he or she has received an “agent of record” letter that authorizes him or her to be the official agent for the property.  So there is, in reality, no situation where multiple insurance agents are able to get multiple actual bids from the same insurance companies for the same property.  It simply doesn’t work that way.

Instead, what you may see if you bring in multiple insurance agents for interviews with the board is a variation in the assumed valuation of the building, and then estimations of the premium that would apply to that valuation.  For example, a broker might make a presentation and say “I don’t think your property is really worth $100 million, I have a legitimate appraiser who will say it is worth $85 million, and that will save you $50,000 on your premium.”  And it will.  But remember that this is not some special discount—the broker is saying that he will lower the appraised value of the building, and in turn QBE or Citizen’s rates will be lower.  But any insurance company doing the same thing would be offered the same rate.

Now, there is a secondary market for insurance for some properties, especially those that are not at high risk from hurricanes or flood.  Many of these insurance companies are smaller and less capitalized, but they can still be highly rated and a safe insurance option.  Different insurance brokers will solicit quotes from different pools of companies outside of the main three or four, so it is a valid question to ask your agent exactly where he or she is shopping your policy.

So if you know that insurance quotes are fixed by law, and that only one agent at a time can receive an official quote, how do you as a board member go about choosing an insurance agent for your community?  Insurance is all about customer service.  When a disaster happens, who is the agent you feel comfortable helping you recover?  Whom do you trust and like working with?  Is your agent local and available to you, or are they based in another state?  When you met, did they tell you the truth about the way condo and HOA insurance works in Florida, or did they sell you a line about how much money they can save you if you would only sign an “agent of record” letter for them?  Remember, that letter is the official letter that changes your insurance agent, as far as insurance sellers are concerned.  So don’t get fooled into thinking that you can sign ten of them and get repetitive bids from multiple providers.  It just doesn’t work that way.  Pick one strong, trustworthy and experienced insurance agent for your association, and let that person do their job—reaching out to every available market, finding an appraiser who will value your property accurately and fairly and bringing you the best quote possible.

Dear Poliakoffs,

I live in a community that is governed by an HOA.  My question is: when I purchased my unit I was told that I was required to pay maintenance fees to the association for the amenities in the clubhouse; however, the board gave one room to a club for their exclusive use and gave the café owner the lounge and the patio area.  I feel that, if I am paying for these rooms, I should have the right to use them (after all, they were listed in the offering).  Signed, S.M.

Dear S.M.,

We are of the opinion that the board does not have the authority to grant an exclusive use right to any part of the common areas to a private club, to the exclusion of the unit owners. However, as to the Board leasing a portion of the club house to a concessionaire for its exclusive use, that is not uncommon, assuming that the Board is vested with the power in the covenants, conditions and restrictions.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

Posted in Condo Associations, Insurance, Rule Enforement and Fines Tagged , , , , ,