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


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 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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Broward County Building Inspection and Certification

   Given the heightened awareness of issues pertaining to the structural integrity of Florida coastal and non-coastal buildings in the wake of the Surfside tragedy, it is important to understand the 40-year building certification process currently in force in Miami-Dade and Broward counties.    Both Miami-Dade and Broward Counties require that, unless exempted, buildings greater than a designated square footage (2000 square feet for Miami-Dade County, and 3500 square feet for Broward County) be inspected for structural integrity and electrical safety issues forty years after the date of original construction, and thereafter, every ten years.  While Palm Beach County does not presently require such inspections, the counties and cities in Palm Beach are in the process of reviewing these issues, and requirements similar to those of Miami-Dade and Broward Counties may be implemented in the near future.    Each June in Broward County, a list of buildings requiring inspection is prepared and sent to the various cities in the county.  Those cities then send out notices of inspection to the buildings and provide them with ninety days within which to obtain structural integrity and electrical safety inspections from a licensed engineer or architect, and to submit their report to the city’s building officials.  If structural and/or electrical defects are identified, which may pose an immediate threat to life safety, those repairs must be completed within one hundred eighty days from the date of the building inspection report.    In Florida, condominium associations have several options available to fund the cost of repairs identified by the engineer or architect’s report, including reserves, special assessments, and/or bank loans or lines of credit.  First and foremost, the use of reserve funds should be explored. Section 718.112, Fla. Stat., provides that a condominium association’s budget “must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The amount to be reserved must be computed...

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Remote Meetings for Associations

     As we begin to move past the Covid-19 Pandemic, and all of the significant hurdles that community associations faced as a result, one of the silver linings is the nearly universal acceptance of technology to conduct regular business. Specifically, with respect to community associations, many associations had no choice but to learn how to conduct its meetings virtually through Zoom or similar platforms. At the time, although the law did not specifically contemplate conducting meetings in such a way, most practitioners agreed that conducting both board and membership meetings virtually was acceptable. Some of that guidance was based upon the powers afforded to community associations under their respective emergency powers statutes of §718.1265 or §720.316, Florida Statutes. However, as we move beyond the declared state of emergency, and the likely expiration of statutory emergency powers, the question remains, may community associations continue to conduct meetings, both board and membership, virtually?             Section 718.112(2)(c), Florida Statutes, governs board of directors meetings for condominiums and provides, in pertinent part: “Meetings of the board of administration at which a quorum of the members is present are open to all unit owners. Members of the board of administration may use e-mail as a means of communication but may not cast a vote on an association matter via e-mail. A unit owner may tape record or videotape the meetings. The right to attend such meetings includes the right to speak at such meetings with reference to all designated agenda items.”             Additionally, §718.112(2)(b)5, Florida Statutes provides that: “A board or committee member’s participation in a meeting via telephone, real-time videoconferencing, or similar real-time electronic or video communication counts toward a quorum, and such member may vote as if physically present. A speaker must be used so that the conversation of such members may be heard by the board or committee members attending in person as well as by any unit owners present at a meeting.”             Likewise, §617.0820, Florida Statutes, which governs all not-for-profit corporations, allows the board, so long as the governing documents do not provide otherwise, to conduct the meeting through any means...

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Key Provisions in 2021 Legislation Affecting Community Associations

        Numerous significant changes to Florida Statutes governing community associations (condominiums, cooperative and homeowners associations) will take effect July 1, 2021, presuming approval and signature by Governor Desantis. These changes are primarily contained in two bills already passed by both houses of the Legislature—SB 56 and SB 630.  The purpose of this column is to provide a brief overview of some of the most impactful changes, although there are many others not addressed here.  A more comprehensive and thorough summary of the new legislation will be contained in our upcoming 2021 Legal Update.           First, SB 56 imposes several new statutory requirements on association delinquent maintenance fees/assessments collection practices—something which, unfortunately, almost all associations have had to deal with at one time or another.  Specifically, the legislation amends the Florida Statutes governing “pre-lien” collection requirements and now requires community associations, before requiring owners to pay any attorneys fees for collection, to first deliver to the owner a “Notice of Late Assessment” allowing the delinquent owner an opportunity to pay before attorney fees for collection are assessed.  An affidavit attesting to delivery of this new notice will now need to be created and kept in owner account files to demonstrate compliance with the new statute.  In addition, SB 56 requires an association intending to change its delivery method for invoices/statements of account to owners to first deliver a notice of the change to each owner at least 30 days in advance. Further, they must receive an affirmative acknowledgement from the owner that they understand the change.  These affirmative acknowledgments will now be required to be maintained in the association’s official records.  Finally, SB 56 increases the statutory time period that pre-lien and pre-foreclosure notices must be delivered by condominium associations and cooperative associations to 45 days (currently 30 days), which conforms with the time periods already required for homeowners’ associations.         In contrast to the specific focus of SB 56 on collection practices, at more than 100 pages long, SB 630 contains a much more substantial and comprehensive set of changes to a variety of statutory...

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Associations May Consider Playing a Role in Vaccine Distribution

        It’s been about a year since the world first learned of COVID-19. Since then, there have been more than 17 million cases and more than 300,000 deaths from the disease in the United States alone. To put it mildly, the pandemic’s effects have been far-reaching. Approximately 12.6 million people have become unemployed, hospitals have been overrun, resources have been tapped, supply-chains have been taxed, and children and adults have been forced to adjust to learning and working remotely. Who would have ever thought that we could or would see such things in our lifetimes?         However, and at long last, we’ve finally received some good news. Where it normally takes five years or more to develop, test, and approve a vaccine for use, we have seen an unprecedented collaboration between the public and private sectors, and Operation “Warp Speed” has resulted in not just one, but four potential vaccines being approved for emergency use in the space of less than one year. Once vaccines have been approved for such use, the challenge becomes one of distributing the approved vaccines and making sure that the most vulnerable among us are the earliest to be vaccinated.         In connection with vaccine distribution, one method that has been used previously involves the “Closed Point of Dispensing (“POD”) Program.” Pursuant to this program, the federal government employs a system for the disbursement of lifesaving medications, from the Strategic National Stockpile to each state’s department of health (DOH). In turn, each DOH is required to dispense these medications to its entire population. To assist in this effort, the DOHs partner with local communities to form PODs so that communities can dispense medications to their residents. An association that has established itself as a Closed POD will have a direct relationship with the county health department to receive, store, and administer COVID-19 vaccines to all its residents once such vaccines are available.         Should such an option become available, a condominium or homeowners’ association would be required enter into an agreement with the county...

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Avoiding the Effects of the Latest HUD Foreclosure / Eviction Moratorium

            As many of you likely already know, the federal government, though the United States Department of Housing and Urban Development ("HUD") and the CARES Act issued moratoriums of mortgage foreclosures and evictions for non-payment of rent. On December 17, 2020, HUD issued its Mortgagee Letter 2020-43, which extended the foreclosure and eviction moratorium as a result of COVID-19. With this latest order the moratorium on residential foreclosures and evictions is extended until February 28, 2021.              There are, however, a couple of important caveats to this order. First, it is important to keep in mind that the moratorium does not prevent a condominium or homeowners association from seeking foreclosure for unpaid assessments. Accordingly, we have advised many of our clients to continue aggressively pursuing the collections of its assessments. In situations that associations may be hesitant to proceed with the filing of foreclosure because there is a bank foreclosure pending or imminent, we would recommend that the associations strongly consider proceeding with its own foreclosure action. The reason being, the longer the banks are delayed from proceeding, the more likely the chance that the association will be able to finish its own foreclosure action resulting in a foreclosure sale.             Second, the moratorium excludes vacant or abandoned properties. In other words, if the residents of the property have already vacated the subject property, the moratorium does not apply, and foreclosure and/or eviction may proceed in the ordinary course. This is important to keep in mind, because often the banks holding the mortgages do not have any idea on the status of the occupancy of the unit, and as a result will assume the property is occupied. This assumption will usually cause the banks to treat all properties as being affected by the moratorium summarily delaying the proceedings. Through close consultation with the associations where many of these properties exist, our office has been successful in opposing the bank's motions to cease proceedings by informing the courts that the moratorium is inapplicable to vacant properties. Such...

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Deficiency Judgements After a Foreclosure Sale

            As a result of the COVID-19 pandemic, the State of Florida-through Governor Ron DeSantis ­imposed a statewide foreclosure moratorium last year. On the federal level, last month the Acting United States Department of Housing and Urban Development ("HUD") Secretary announced an extension of foreclosure moratoriums on federally-backed single family mortgages through March 31, 2021. Despite these moratoriums, Florida has one of the highest foreclosure rates in the country. According to ATTOM Data Solutions, one in every 7,338 housing units in August 2020 had a foreclosure filing compared to one in every 13,791 housing units in the United States.             While many foreclosures are brought by lenders seeking to foreclose on mortgages, lien foreclosure lawsuits continue to be filed by condominium and homeowners' associations due to property owners' nonpayment of assessments. Under the Condominium Act, a foreclosure lawsuit must be filed within one year of the filing of the association's lien whereas the statute of limitations for homeowners' association foreclosures is five years. When a mortgage lender is not foreclosing, many of our association clients will proceed with a lien foreclosure lawsuit against an owner's property for non-payment of assessments even if the property may be underwater.             A final judgment of foreclosure will state the amounts due to the association, and, if the owner fails to timely pay the total sum owed to the association, a foreclosure sale will take place. Where the proceeds from the sale are insufficient to satisfy the association's judgment, there will be a deficiency. In 1996, Florida's Fourth District Court of Appeal, in Maya Marca Condominium Apart. Inc. v. 0 'Rourke, established that associations may obtain deficiency judgments against foreclosed owners in situations where acquiring an underwater property through foreclosure does not make the association whole. Upon acquiring an underwater property, an association should determine whether to pursue a deficiency judgment against the owner personally, which decision hinges upon whether or not the owner is or is likely in the future to be collectible. Associations should keep in mind that...

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Pending Legislation Which Would Limit Association Liability For Covid-Related Claims

            As many of you may know, the 2021 Florida legislative session recently began, and already several bills have been filed that relate to community associations. None, however, may be more important than House Bill 7, and its corresponding Senate Bill 72, which would act to protect associations from liability due to Covid-related claims. Under the law, a Covid-related claim would include any civil liability claim which arises from or is related to Covid-19, and includes any claim for damages, injury or death. Further, the legislation is applicable to all not-for-profit corporations, which would include all community associations and many country clubs.             Under the pending legislation, a plaintiff is required to plead their claim with particularity. Further, the plaintiff would be required to submit an affidavit, signed by a physician licensed in the State, which attests to the physician’s belief, within a reasonable degree of medical certainty, that the plaintiff’s Covid-related damages, injury or death occurred as a result of the defendant’s actions or omissions.             Presuming the plaintiff was able to do so, the court then would be required to determine, as a matter of law, whether the defendant made a good faith effort to substantially comply with the controlling governmental issued health standards or guidelines that were available at the time the cause of action arose. Admissible evidence would be limited to demonstrating whether or not the defendant made such a good faith effort.             If the court determined that the defendant made such a good faith effort, the defendant would be completely immune from civil liability. Further, if more than one set of standards or guidance was controlling or available at the time the cause of action arose, the defendant’s good faith effort to substantially comply with any one of such standards or guidelines would provide complete immunity from civil liability.             In addition, even if the court determined that the defendant did not make such a good faith effort, the proposed...

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