Revisiting Your Rules and Regulations in the New Year

Steven G. Rappaport

First and foremost, Sachs Sax Caplan would like to wish everyone a happy and healthy new year!  We know that this is a time for many people to make resolutions for the upcoming year ahead.  One resolution that many Associations may wish to make in 2023 is revisiting their rules and regulations.  Many Associations may have outdated rules and regulations that need to be updated and amended.  Other Associations may have been lax in their enforcement of rules and may need to republish their rules and restrictions, so that they may be properly enforced on a moving-forward basis. If you are an Association, whether a Condominium Association or Homeowners Association, that has not been uniformly enforcing your rules and regulations, Florida law allows you to go through a republication process whereby you send a letter to the community republishing the rule or restriction that has not been properly enforced which will allow you to enforce those rules on a moving-forward basis.  If you have any such restrictions, whether they are in your rules and regulations or in your Declaration of Covenants or Declaration of Condominium, it is important to avoid selective enforcement issues in the future, you republish this rule or restriction and “clean the slate” on a moving-forward basis.  You can send the rules and regulations or other restrictions out to the community with a cover letter stating that the Board of Directors, on a moving-forward basis, will be enforcing these restrictions.  Any pre-existing violations that were not enforced would likely need to be grandfathered, but at least this will allow the Associations to be in a better position to enforce these revitalized rules and regulations and other use restrictions. Also, this may be a good time for Associations to evaluate existing rules and regulations and to determine whether they need to be updated or amended.  It is important to remember that, while rules and regulations may be adopted by the Board without needing a membership vote (unless the documents specifically require a membership vote), if you are adopting or amending rules and regulations that regulate the use of Condominium...

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What are Surplus Funds from Foreclosure Sales and How Can They Impact an Association?  

Vuth Un

Surplus funds are extra monies above the foreclosure judgment amount held by the Clerk of Court following a sale in a foreclosure case. The plaintiff in such cases (either the Bank or the Association) may only bid up to its judgment amount at the sale. If the winning bid is higher than the judgment amount, the difference between the winning bid and the judgment amount are the surplus funds.  For example, a Bank obtains a judgment for $300,000.00 representing the past-due principal, interest, late fees, attorney’s fees, and costs associated with the mortgage foreclosure lawsuit it filed. At a subsequent public sale, the Bank bids up to its $300,000.00 judgment but the property is so highly coveted that it attracts additional bidding by private parties. These third parties push the bidding well above $300,000.00 and the winning bid is ultimately, for example, $450,000.00 from third-party bidder, John Doe. In this scenario, the surplus funds are $150,000.00.  The Clerk will hold the $150,000.00 in surplus funds in the court registry until a court order instructs the Clerk as to how to distribute the money. A few weeks following the sale, the Clerk will issue the certificate of disbursement which itemizes how much money, if any, is held in the court registry from the foreclosure sale. All parties to the foreclosure case will receive a copy of the certificate of disbursement and will be put on notice of any surplus fund amounts.  If there’s no surplus funds, then the plaintiff Bank, in our example, is the winning bidder at the mortgage foreclosure sale.  Junior lienholders in such a mortgage foreclosure case such as second mortgages, and condominium and homeowners associations claiming unpaid assessments, may and should also file claims against the surplus funds.  The sooner a claim is filed, the sooner it may be set for hearing before the judge. Of course, often there may not be enough surplus funds to pay all junior lienholders in full, so time is of the essence. A junior lienholder who gets in front of the judge first may get paid on its claim if no other...

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Recent Advancements in Association Law

Michael Chapnick

Warren Buffett once said, “Risk comes from not knowing what you’re doing.” As we approach the end of 2022, we thought it appropriate to see if we can reduce the risk surrounding the management and operation of condominium and homeowners’ associations by focusing on five (5) relatively recent advances in Association Law that may have a profound effect on how these communities operate.  These five (5) areas are: assessment collection letters, association registration, alternative dispute resolution, fining and/or suspension of use rights, and, last, but certainly not least, reserves. As to collections, Sections 718.121(5) and 720.3085(3)(d), Fla. Stat., now require that condominium and homeowners’ associations may not require the payment of attorneys’ fees related to a past due assessment unless the association (or its managing agent) provides the unit owner with a notice letter giving the owner thirty (30) days within which to make payment.  A rebuttable presumption that this letter has been sent is created by the execution of an affidavit by an officer, director, agent, or licensed community association manager attesting to the same.  Thus, if your association plans on attempting to recover its attorneys’ fees from a unit owner for collection of past due assessments, the thirty (30) day letter and affidavit are a necessity. As part of Senate Bill 4-D, all condominium and cooperative associations with buildings three (3) stories or higher are required to report certain information to the Division of Florida Condominiums, Timeshares, and Mobile Homes, on or before January 1, 2023.  The information that is required includes, among other things: the name of the association, the number of buildings that are three (3) stories or higher in height, and the total number of units in those buildings.  Condominium and cooperative associations may register at http://www.myfloridalicense.com/DBPR/condos-timeshares-mobile-homes/building-report/. Since 1992, when a disagreement arose between a condominium association and a unit owner as to an issue that met the statutory definition of “dispute,” they were required to submit to what is called mandatory non-binding arbitration with the Florida Department of Business and Professional Regulation.  Disagreements between associations and owners in homeowners’ associations, on the other hand, had...

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New Mandatory Reserve Requirements for Condominiums and Cooperative Associations

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More than a year after the tragic collapse of the Champlain Towers South condominium building in Surfside, Florida, condominium and cooperative associations throughout Florida now face a host of new legal requirements and restrictions imposed by SB 4D, which was passed unanimously by the Florida Legislature and signed into law by Governor DeSantis on May 26, 2022. The legislation is aimed at protecting the long-term structural safety and integrity of multi-story buildings in Florida and preventing similar tragedies. In previous columns, SSC has discussed the inspection and transparency requirements of the new law. However, although such legislation may be long overdue and well-intentioned, unit owners in condominium and cooperative associations throughout Florida are likely to find that in the short term the cost of living in such buildings will increase significantly, as a result of the requirement that associations collect mandatory reserves on an ongoing basis. In addition to requiring “milestone inspections” and imposing new reporting and transparency standards on matters relating to building structural safety and integrity, SB 4D creates strict new requirements for associations three (3) stories or taller regarding the calculation and funding of reserves for long-term maintenance and replacement of certain “structural” components of these buildings. Specifically, at least once every ten (10) years, associations must now complete a so-called Structural Integrity Reserve Study (“SIRS”) for each building in the condominium or cooperative that is three stories or taller. A SIRS is defined as “a study of reserve funds required for future major repairs and replacement of the common areas based upon a visual inspection of the common areas." Although the reserve study may be performed “by any person qualified to perform such study,” such as an accountant, the visual inspection portion of the SIRS must be performed by a licensed engineer or architect. At a minimum, the SIRS must identify and state the remaining useful life and replacement cost or deferred maintenance expense of the common areas being visually inspected and, based upon such visual inspection, provide a recommended annual reserve amount that should be included in the association’s annual budget for those common areas. Several...

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Is Virtual Participation in Community Association Meetings Here to Stay?

Michael Ungerbuehler

As Community Association attorneys, something we've been asked often lately is whether associations may hold their meetings strictly by Zoom or any other video conferencing or virtual process. The answer is Florida law does allow videoconferencing and provides the ability to do so for both members and board meetings.  For board meetings, the statute provides that directors may participate in any meeting virtually or by remote communication, including voting on board matters, and that remote communication is deemed to be “in person” participation.  Therefore, board meetings can be held in person, completely virtual, or a hybrid of both. Importantly, the statute requires that the directors attending remotely must be able to be heard by everyone else attending the meeting. For virtual meetings, this is easily accomplished as all participating in the videoconferencing can hear each other when they speak. For in-person meetings, it is necessary for a two-way speaker to be utilized so that any directors participating remotely can be heard by all in attendance.  As to members meetings, Florida law also provides that members may participate remotely. In this respect, the statute requires the board to adopt guidelines and procedures to verify that each person deemed present and authorized to vote remotely, is a member or proxy holder. Once those procedures and guidelines are established, members may participate in meetings remotely, are deemed to be present “in person” at the meeting and may vote remotely. Once the procedures and guidelines are adopted, members may participate in a meeting through Zoom or other videoconferencing methods either on their laptops, or by phone. The key is to be able to identify that the people participating are actually members or their authorized representatives (proxies) who can participate on behalf of the members. This is critical because it ensures that quorum requirements are complied with at virtual meetings.  When preparing the notice for a meeting, it is recommended that the notice specifies in advance whether the meeting is going to be strictly virtual or if it's going to be a hybrid, where some members are there in person and some are virtually attending. Then...

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Part 2- August Series- INSPECTIONS - TRANSPARENCY

Len Wilder

Born from the tragedy of Surfside’s Champlain Towers South collapse is the passage of Senate Bill 4D that was signed into law by Governor DeSantis on May 26, 2022. For the first time, state law now mandates that condominium and cooperative buildings that are three (3) stories or higher must undergo milestone structural integrity inspections, must obtain structural repair reserve studies or reports and in accordance with such inspections and reports, must collect adequate reserves to fund anticipated structural repairs to the association’s roof, load-bearing walls, floor, foundation, and other structural components enumerated in the new statute. Further, effective December 31, 2024, associations will no longer be able to waive these reserves or use the funds for different purposes. The necessity for these mandatory requirements was readily apparent as many condominium and cooperative communities delayed or otherwise put off making essential repairs due to financial concerns. Such delays, as recently demonstrated, may lead to tragic consequences. Now, the failure to fund reserves can be deemed a breach of fiduciary duty of the board of directors and officers of the condominium or cooperative association. A significant part of the new law also requires a level of transparency that has not existed beforehand. The Condominium (Chapter 718) and Cooperative (Chapter 719) Acts have always required their official records to be open for inspection by any owner or their representative. However, the recent amendments now stress a heightened level of importance in ensuring that structural inspection reports and reserve studies are publicized as follows: (1) condominium and cooperative associations must now distribute a copy of its required inspection report to all owners by either U.S. Mail, hand-delivery or if authorized beforehand by a unit owner, via email; (2) the inspection report must be posted in a conspicuous place on the common areas as well as published on the association’s website if such website is statutorily required; (3) both the inspection report and the structural reserve study must be kept with the official records of the association for at least fifteen (15) years; (4) a copy of the inspection report must be furnished to local...

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New Building Inspection Requirements

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The proverb “time and tide wait for no man” may be true, particularly regarding the impact of the sunny, salty, and windy conditions on structures along Florida’s coasts.  However, a recent law requiring periodic inspections of buildings will help protect community associations and the millions of people who live in condominium units from the harsh reality revealed by that expression.  These new safety measures may impact associations’ finances but careful planning ahead should mitigate against any severe impact on condominium unit owners.  Recently, and almost a year after the catastrophic collapse of Champlain Towers South in Surfside, Governor DeSantis signed into law requirements, unanimously approved by both chambers of the legislature for periodic inspections based on the age and location of buildings and for association condominium boards to set aside sufficient reserve money to cover future repairs.  Though the law took effect on May 26th, condominium buildings within the “milestone” age requirements have until December 31, 2024, to comply with the inspection requirements.  The milestone requirements apply to condominium buildings three (3) stories or higher and require that the following be re-certified as safe: (i) all buildings thirty years old or older; and (ii) those buildings at least twenty-five years old and within three (3) miles of the coast.  Every ten (10) years after that, all buildings to which the statewide structural inspection program applies must be re-certified again.  Generally, initial milestone structural inspections must be conducted by December 31st of the building’s 30th or 25th year based on the date the certificate of occupancy for the building was issued and depending upon its location in relation to the coast.  The new laws will not apply to most Chapter 720 Homeowners Associations provided that none of the structures within the community are three (3) stories or higher. There are two (2) phases for mandatory inspections.  If a visual inspection by a licensed engineer or architect reveals no signs of substantial structural deterioration, no further action is necessary until the next required inspection.  However, if structural deterioration is detected, a second phase of more thorough testing is required.  Such inspections may potentially...

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Surfside Collapse Leads to Additional Scrutiny & Due Diligence from Mortgage Companies to Condominium Associations

danny

As we pointed out in an earlier column, one of the direct side effects of the tragic Champlain South Tower collapse was the additional scrutiny and due diligence that mortgage companies were going to apply before issuing mortgages in condominiums. At that time, Federal National Mortgage Association (“Fannie Mae”) issued Lender Letter (LL-2021-14), titled Temporary Requirements for Condo and Co-op Projects, which imposed new “temporary” rules and restrictions pertaining to Fannie Mae’s purchase of loans from primary lenders on the secondary market. These new requirements went into effect on January 1, 2022. What has resulted since is the requirement that any mortgage servicer who wishes to write a mortgage that may eventually be sold on the secondary market must create robust questionnaires for associations to answer before a mortgage will be issued. The problem now is that condominium associations are receiving these questionnaires, and due to the breadth and scope of the questions, are unsure on how to answer. For example, the following examples may be found on questionnaires: Are there any conditions, project wide, regarding deferred maintenance (within the past 5 years) which may negatively impact the safety, structural soundness, habitability, or functional use of any individual unit or the project as a whole?If a unit is taken over in foreclosure, what is the maximum number of months of assessments for which the lender is responsible?What amount is currently in reserves?Is it anticipated that the project will have code enforcement violations in the future? andAre there any planned special assessments in the future? While we understand that the scope of these questions is based upon determining whether the structure of the building is sound, and that the association is in good financial footing, the reality is that many of these types of questions require a nuanced response. A response could impose significant liability to the association if answered incorrectly. §718.116(8), Florida Statutes contains the questions that an association is required to respond to for an estoppel certificate. These questions are more in the nature of, how much are the assessments, and how often are they paid, or is there a...

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Pending Legislation Regarding Tree Removal Affecting Community Associations

Steven Rappaport attorney

With the 2022 legislative session ending on March 11, very few pending association-related bills were passed this year.  However, one very important bill relating to tree removal for community associations was passed through both houses and now awaits the governor’s signature.  This bill, if signed into law, will have a very adverse effect on condominium and homeowners associations.   As many may recall, in previous sessions, the legislature enacted a law to provide that a local government, such as a city or county, may not require applications, permits or other approval processes for the pruning, trimming or removal of a tree on “residential property” if the owner of the property (i.e., association) provides documentation from an arborist or licensed landscape architect that the tree presents a danger to persons or property.  Many associations have been operating under the premise that this law would allow a community association to remove or otherwise deal with dangerous trees in the common areas, such as street trees, that pose a danger to the community and would allow the association to deal with these trees without having to go through the extensive permitting and approval process through the applicable cities or counties.  In fact, recently, Palm Beach County issued a clarification specifically interpreting the existing law to provide that “residential property” includes association common areas and would allow associations to remove trees without going through the cumbersome permitting and approval process.   However, the pending bill that is awaiting the governor’s signature would reverse this position in a way that would negatively affect community associations.  The pending legislation specifically defines “residential property” to mean a single family or detached building located on a lot used for single family residential purposes.  Therefore, under the new law, if it were to go into effect, it would become clear that trees located in the association’s common property would not be allowed this exception and would have to go through the applicable permitting and approval process with the city and/or county in which the tree is located. We understand that several groups that advocate on behalf of community associations are currently lobbying...

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Is Taking Legal Action a Remedy to Criticism From Unit Owners?

We often get phone calls from officers and board members of condominium and homeowners’ associations who feel they have been criticized unfairly by unit owners. Sometimes, they insist on taking legal action to put a stop to the most unfair or mean-spirited of the attacks. These calls are as varied as the condominium and homeowners’ associations in Florida. Sometimes the caller has an extremely serious concern; sometimes, not so much. The first discussion between and lawyer and a client in this situation is the possible application of defamation law to counterattack against the critic. Defamation includes two types of legal claims: Libel, for written defamation, and slander, for spoken defamation. In modern law, there is not much difference between the two except that one is spoken and one is written, but the terms linger in the law from its ancestry. Whether the words are actionable as a defamation depends on the words used and the context in which they are used. On this topic, my bookshelves are filled with multi-volume treatises, and in my practice, I cite to scores of Supreme Court decisions of thousands of pages. To be clear, in this blog, I am going to discuss only one tiny piece of this vast body of law. Pubic-spirited people who offer themselves up as volunteers to serve on community associations naturally tend to feel they are in the private sector and are not “politicians” or “officials.” True as that may be, it is also true that by stepping up to a leadership role in their community, they voluntarily submit to a certain amount of public scrutiny. At least, they do so to the limited extent of their control over matters of interest to the residents they serve, especially the collection and expenditure of the association’s money. They have surrendered some of their obscurity and anonymity and accepted a limited “public figure” status. They have given other people a constitutional right under the free speech clause of the First Amendment to criticize their performance publicly. Thus, to some extent, when it comes to defamation law, they are analogous to a local...

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OSHA Issues Emergency Temporary Standard to Enhance Employee Protections From COVID

On November 4, 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an Emergency Temporary Standard (“ETS”) aimed at protecting workers from coronavirus. OSHA indicates that this guidance will increase protections for more than 84 million private-sector workers. The ETS covers employers with 100 or more employees-firm or companywide- and provides options for compliance. So, this is likely to affect many Country Clubs, as Country Clubs often employ their own staff as opposed to hiring a staffing or management company. It may also impact large condominium or homeowners associations if they directly employ 100 or more people or if their management company does and the association has an indemnity obligation in the management agreement. The ETS, which is set to go into effect on November 5, 2021, requires covered employers to do the following: Survey the workforce and determine the vaccination status of each employee, which includes obtaining acceptable proof of vaccination status from those staff that is vaccinated.Create a protocol for testing for unvaccinated employees, which requires testing for COVID-19 to occur at least weekly.Require that employees who are not fully vaccinated to wear facial coverings when indoors or in a vehicle with another person.Require employees to provide prompt notice of a positive COVID-19 test, and immediately remove that employee from the workplace, regardless of vaccination status, until they meet certain negative testing criteria. In essence, the ETS requires all employees of covered employers to become fully vaccinated or else be required to submit to weekly testing. The ETS requires covered employers to provide paid leave for employees to get vaccinated (up to four hours) and an unspecified amount of paid sick leave for employees to recover from the side effects of the vaccine. The ETS does not require covered employers to pay for the vaccine itself. For those employees who choose not to be vaccinated but instead submit to weekly testing, the expense of testing is borne by the employee, not the employer. The ETS also does not apply to those employees who work exclusively outside, remotely from their homes, or in workplaces with no...

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Wishing You a Very Happy 2022!

From all of us at Sachs Sax Caplan, P.L., we want to wish you and your family a safe and very Happy New Year!

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THE FEDERAL VS. FLORIDA VACCINE MANDATE TUG OF WAR

The Occupational Safety and Health Administration (OSHA) released its rule on November 4, 2021, mandating employers with at least 100 employees to require all their employees to be vaccinated against COVID or to wear masks and get tested weekly for COVID. The federal rule provides exemptions based upon medical reasons or entitlement to an accommodation due to disability or deeply held religious beliefs. As part of the federal rule, employers would be required to obtain proof of vaccination from those employees who have been vaccinated. Although the federal rule was originally scheduled to take effect on December 6th, the start date was bumped back to January 4, 2022, following a temporary nationwide stay imposed by a federal court. On January 7th, the United States Supreme Court heard legal arguments regarding challenges to the enforceability of this federal rule. Notwithstanding, OSHA had stated that employers with 100 or more employees should plan to comply with the rule as OSHA intended to move forward with enforcement. OSHA noted that in light of the temporary stay, those employers who have exercised reasonable, good faith efforts to comply (but have not yet complied) will not be issued citations for noncompliance until after January 10th. Further, OSHA will not issue citations for failing to test unvaccinated employees until after February 9th. On the other hand, on November 18, 2021, Florida enacted Section 381.00317, Florida Statutes, which prohibits private employer from requiring vaccine mandates that do not permit for wide-ranging exemptions to opt out. In addition to exemptions for medical, disability, and religious beliefs, the statute also requires exemptions based on an employee's agreement to get tested regularly or an agreement to wear personal protective equipment (PPE) around others. Although the federal law allows for regular testing and wearing of face masks in lieu of vaccination, Florida's statute requires employers to allow for an exemption either for regular testing or for wearing PPE. Employers are subject to significant fines for terminating an employee in violation of this new law (up to $10,000 per employee for businesses under 100 employees; up to $50,000 per employee for business with...

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Performance and Payment Bonds


The extra security can be worth its weight in gold Construction projects are often difficult. Many different considerations need to be reviewed by board members, which often result in complicated business negotiations. One crucial consideration for board members is the fact that you are using other people’s money for the project being contemplated by the association or country club. Unlike when you are doing a project for your own private home or property, when doing a project for an entity, it is vital for board members to put in place contractual protections for the benefit of the project and the money being spent for the benefit of the members. Performance and payment bonds on construction projects provide an additional layer of protection for the benefit of the organization and its members. As such, they are regularly recommended by counsel representing community associations or country clubs. These bonds come in two parts (1) a performance bond which protects against non-performance of the contract requirements by the contractor, and (2) a payment bond which protects in the event payment is made by the entity to the contractor and the contractor fails to pay its subcontractors or suppliers on the project. In Florida, there are two versions of a payment bond, (1) an unconditional payment bond and (2) a conditional payment bond. An unconditional payment bond has the effect of removing the lien rights from the real property and placing any non-payment claims against the payment bond issued by the bond surety. With an unconditional payment bond, if there is any dispute regarding payment to a subcontractor, the bond surety will likely immediately step in and protect the association or club by making payment to the claimant. However, with a conditional payment bond, the surety’s obligation under such bond is only triggered after payment is made on the applicable invoice or payment application requested by the contractor. This may become problematic if the association or club has exercised its contractual right to withhold payment for some reason, such as defective work. As such, unconditional payment bonds are the preferred type of payment bond due...

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New Laws Affecting HOA Rules and Regulations


As you may be aware, several changes were made to both Chapters 720 and 718, Fla. Stats., in the 2021 legislative session. Among the many changes in Chapter 720, Fla. Stat. was the removal of Rules and Regulations from the definition of “Governing Documents.” Previously, “Governing Documents” were defined in the Homeowners Association Act to include the Declaration of Covenants, Bylaws, Articles of Incorporation and Rules and Regulations. This was very important for many reasons, including the fact that amendments to Governing Documents are required by law to be recorded in the public records. Therefore, for the last several years, we have been advising clients that even changes to the Rules and Regulations are required to be recorded. With this new change in the law, amendments to the Rules and Regulations no longer are required to be recorded in the public records. There is no prohibition from doing so and we sometimes recommend recording changes to the Rules. This puts the world on record notice of the changes in the Rules and Regulations over time. However, the removal of the Rules and Regulations from the definition of “Governing Documents” has some additional consequences. For example, under Section 720.305, Fla. Stat., a homeowners association may levy fines in an amount not to exceed One Hundred ($100.00) Dollars per violation and One Thousand ($1,000.00) Dollars in the aggregate for a continuing violation, unless the “Governing Documents” provide otherwise. The previous years since the Rules and Regulations were included in the definition of Governing Documents, we have been advising clients that they may increase the amounts that can be levied for fines in a homeowners association through Board adopted Rules and Regulations so long as such rules did not conflict with a superior provision in the Declaration, Articles of Incorporation or Bylaws. However, now, since the “Governing Documents” no longer include Rules and Regulations, any such authority to charge fines in a higher amount than the above-referenced thresholds must either be in the Declaration, Articles of Incorporation or Bylaws, and may no longer be contained in the Rules and Regulations. It is important to...

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