Does Your Insurer Have a Duty to Defend Your Business?

A key consideration in developing a litigation strategy is whether or not insurance coverage applies to the causes of action at issue, which is important for both parties. For the plaintiff, coverage can mean that he has a greater chance of collecting on his judgment if it is going to be paid from insurance proceeds. For the insured defendant, insurance coverage can provide reassurance that, if any monetary judgment is awarded against him, he will not have to satisfy it from his own assets. Equally important, his policy will also probably stipulate that the insurer will provide him with an attorney and legal defense for any claims covered by the policy.Boards must have the authority to implement/ratify and enforce the rules of the community. This authority must come from the Associations’ governing documents. We suggest the Association’s rules are reviewed by counsel. We can assist you with this for a reasonable fee. Call our office today at 386-310-7997.

Governing Document Amendments in HOA’s

Making Amendments to Governing Documents

Amendments to governing documents must contain the full text of the provision to be amended; proposed language to be added is to be underlined and deleted language must be stricken. §720.306(1)(e)If the changes are so extensive that underlines and strike throughs would hinder, rather than assist the understanding of the proposed amendment, a notation must be inserted stating “Substantial rewording. See governing documents for current text.”Amendments to governing documents are effective when recorded in the public records.Immaterial error or omission in the amendment process doesn’t invalidate the amendment*Notices for required amendments must be mailed or delivered to the addresses of the owners on the property appraiser’s website, or electronically if the owner has consented in writing to receive electronic notices.

Suing Your Condominium Board Members: Many Hurdles to Jump

Most of the time, Condominium Board members have the best interest of their fellow Unit Owners at heart. They try to follow the law and do what is in the best interest of the Association. But every so often, there is a bad egg on the Board. Embezzlement of corporate funds, fraud and self-dealing can deplete the Association’s assets and harm the other owners. In this circumstance, individual shareholders may want to sue the offending Board member to recoup the misappropriated funds. However, such a lawsuit is easier said than done.

A lawsuit against rogue Board members by Unit Owners on behalf of the Association is called a derivative action. Before filing a derivative action, a shareholder must first send a 90-day demand letter to give notice to the Board of Directors of the alleged breaches of fiduciary duty to the Association. The Board can then either appoint an independent committee to investigate the claim, do nothing, or reject the claim. If the Board does nothing for 90 days, if they reject the demand before the expiration of 90 days, or if irreparable harm would result from waiting 90 days, then the Unit Owner can file a derivative action against the offending Board member. This 90-day demand letter is a precondition to a lawsuit created by Florida Statutes 617.07401, so any lawsuit filed without the 90-day letter will be dismissed.

Additionally, there is an issue of whether the Unit Owner’s lawsuit is on behalf of the Association or on his own behalf. Cases brought on behalf of the individual Unit Owner do not require the 90-day demand letter for a derivative action. A recent Florida Court of Appeals, First District, case, Iezzi Family Ltd. P’ship v. Edgewater Beach Owners Ass’n., Inc., 254 S.3d 584 (1st DCA 2018), discusses at length the difference between a case brought on behalf of the Association versus a case brought on behalf of an individual Unit Owner. The difference comes down to the injury. If the injury is to every member of the Association, then it will be a derivative action. For example, if the Board of Directors embezzles the reserves for a new roof, all owners would be injured equally, even if all owners are not required to pay the exact same amount towards that reserve fund.

On the other hand, when injuries are to an individual owner, then it is not a derivative action and no 90-day demand letter is required. For example, if the Board Member embezzled the roof fund and thus did not repair the roof, and failure to repair the roof results in water damage that affects a particular Unit and not every Unit, then the individual can sue the Board directly without the need for the 90-day demand letter. Thus the injury to the individual shareholder must be unique from the injuries to other Unit Owners of the Association to avoid having to send the 90-day demand letter.

Finally, even if you can sue the Board member, a Board member will only be liable when his actions amount to fraud, self-dealing, criminal activity, unjust enrichment, and/or betrayal of trust. Ordinary neglect of duties will not do. There must be some evidence that the offending Board member willfully and intentionally veered from his duties to protect the best interests of the Association.

In sum, a derivative action suit can be an effective way to recoup misappropriated Association funds. But members must be careful to follow all preconditions before jumping headlong into a lawsuit.

2017 Florida Legislative Update: Condominiums, Cooperatives, and Homeowners’ Associations

The following is a summary of new laws EFFECTIVE JULY 1, 2017, UNLESS SPECIFICALLY STATED OTHERWISE.

  1. Estoppel Certificates SB 398: Florida Statues 718.116 and 720.30851

An estoppel certificate is a document, on paper or electronic, sometimes called an estoppel letter. The buyer of, or mortgage lender for, a parcel traditionally seeks the certificate to confirm the amount owed to the association administering the community, and usually identifying the next regular and special assessment levied and due. These certificates are important because a sale or refinancing frequently will not occur if the letter is not available to confirm that the buyer or lender will not owe have to pay more money than expected.

The preparation and issuance of estoppel certificates by Florida condominium, homeowners’ and cooperative associations, governed respectively by Chapters 718, 719 and 720 Florida Statutes, is drastically changed. This Bill, amending Sections 718.116, 719.108, and 720.30851, mandates contents, effectiveness, timing, and refunds charges for estoppel certificates.

  1. Notice: Estoppel requests may be transmitted by an owner, mortgage holder or either of their designees. Transmittal may be in writing or electronically. The Association’s website must identify the name of the person or entity designated to receive estoppel certificate requests, together with the street or e-mail address for receipt. To avoid misplaced requests, An Association may desire to create dedicated email addresses for requests, and policies as to how requests are handled upon receipt.

Response: Within ten (10) days of a request an estoppel certificate must be delivered to the requestor on the date issued by hand delivery, United States Postal Service regular mail, or e-mail.

Who: The Association may be bound by an estoppel certificate issued by any: Association director, authorized agent or representative; and, any management company employee, authorized representative authorized agent. Associations should consider policies limiting who communicates information.

Contents: Estoppel certificates must contain, in addition to the date of issuance, unit/parcel owner name, unit/parcel number of the requesting owner, regular assessment amount, paid through date and next installment, the following:

  • Parking space or garage number.
  • Fee for certificate.
  • Name of requester.
  • If there is a delinquent amount the name and contact information of the attorney handling.
  • If monies are due on the date of issuance, an itemization of all amounts due together with amounts coming due through the effective date of the certificate.
  • Additional assessments and other monies scheduled to be due within the effective period of the certificate.
  • Capital contribution requirements.
  • Use restriction violations noticed to the owner.
  • Transfer approval requirements, and,
  • Association insurance contact information.
  • Officer or authorized agent signature.

Is there a right of first refusal provided to the members of the association.

Associations will want to gather the general information now, and enact a process to regularly update, and provide the information to counsel, as well as determine how to gather unit specific information, such as violation information.

  1. Effective Date: An estoppel certificate is to have effective period of 30 days if sent by e-mail and 35 days if sent by regular mail. Associations will want to ensure that the certificate includes all future accruing items within those deadlines.
  2. Fees: If a fee is charged, then the Board of Directors must adopt a resolution in writing authorizing the collection of a fee which may not exceed:
  • Base: $250.00 if no delinquent amounts are due to the Association.
  • Timing: An additional $100.00, for a three-day expedited period.
  • Delinquency: An additional $150.00, if there is a delinquent amount is owed.

These amounts are to be adjusted every five years in the same manner as the Consumer Price Index changes. Multiple units from the same seller have additional limitations. No preparation fees may be charged: if a certificate is not provided within 10 business days of the request; nor, for an amended certificate. An association must have an authorizing resolution or written contract adopted by July 1, 2017.

The max fee an association may charge when it receives simultaneous requests for estoppel certificates for multiple units or parcels owned by the same person and no past due monetary obligations owed to the association is as follows:

  • For 25 or fewer units, $750
  • For 26 to 50 units, $1,000.00
  • For 51 to 100 units, $2,500
  • Reimbursement: The statutory right to a non-payor owner to be reimbursed the certificate fee if a sale or mortgage of a unit does not close within thirty days after the anticipated closing date cannot be waived. If there is litigation over the right to reimbursement, the prevailing party is entitled to attorney’s fees and costs.
  • Binding authority: The Association will be bound in most instances by the information contained in the certificate.
  1. Financial Reporting HB 6027: Condominium, Cooperative, and Homeowners’ Associations, Florida Statues 718.111(13), 720.303(7) and 719.104(4)
  • HB 6027 deletes the year-end financial reporting exemption for associations that operate fewer than 50 units or parcels. Under previous law, these associations were not required to prepare a year-end annual financial report based on revenues, but rather, could prepare a report of cash receipts and expenditures.

Now, all associations must prepare a financial report based on annual revenues, regardless of the number of units or parcels. As a reminder, the following thresholds are contained in the law:

  • An association with total annual revenues of $150,000 or more, but less than $300,000, must prepare compiled financial statements.
  • An association with total annual revenues of at least $300,000, but less than $500,000, must prepare reviewed financial statements.
  • An association with total annual revenues of $500,000 or more shall prepare audited financial statements.
  • An association with total annual revenues of less than $150,000 is only required to prepare a report of case receipts and expenditures.

Further, for condominium and cooperative associations, HB 6027 also deleted the limitation on the number of times an association can waive its financial reporting requirements. Previously, condominium and cooperative associations could not waive the statutorily required financial reports for more than three consecutive years.

This provision has now been deleted, although there is a bit of a glitch in the statutes since HB 6027 removed the provision, while HB 1237, which also amended these sections, left them intact. It remains to be seen how the official version of the Florida Statutes, which is due to be released in the next couple of months, will address this conflict.

 Condominiums ONLY HB 1237: FLORIDA STATUES 718.111(1)

HB 1237 seeks to create many criminal and claim thresholds that will lead many Officers and Directors to confirm insurance coverage, procedures, and management. Many condominium associations will have to revise election and recording keeping, and create Internet webpages. This law applies only to Florida condominium associations, not to homeowners’ associations.

  1. Criminal Penalties:

Sections 718.111(1)(d), An officer, director, or manager may not solicit, offer to accept, or accept any thing or service of value or kickback for which consideration has not been provided for his or her own benefit or that of his or her immediate family. If applicable, a violation of this provision may result in criminal penalties as provided in Section 718.111(1)(d)

718.111(2)(a) and (d) create criminal penalties for a number of matters:

  • Forgery of a ballot envelope used in an election is punishable as provided in Section 831.01;
  • Forgery of a voting certificate used in an election is punishable as provided in Section 831.01;
  • Theft or embezzlement of funds of a condo is punishable as a crime as provided in Section 812.014;
  • Destruction of an official record or refusal to allow inspection or copying of an official record in furtherance of a crime is punishable as tampering with physical evidence as provided in Section 918.13 or Section or as obstruction of justice as provided in Chapter 843; and,

Practical Note: Charged, not convicted, requires removal from office and the vacancy is to be filled during the pending of the case and the accused being disqualified to serve until the charge is resolved. If there is no finding of guilt, then the accused is reinstated as a director, assuming there is a term remaining. Additionally, the removed Officer or Director may not have access to the official books and records of an association except pursuant to a Court Order.

Practical Note: the term “kickback” is not defined by the statute. It is very important that all associations have well-defined election procedures, official records retention and inspection rules, and secure and transparent financial procedures. IMPORTANT THAT ALL ASSOCIATIONS REVIEW THEIR INDEMNIFICATION PROVISIONS CONTAINED WITH THE GOVERNING DOCUMENTS WITH ASSOCIATION ATTORNEY AND INSURANCE AGENT/BROKER. WE MAY SEE A TREND TOWARD OVERLY AGGRESSIVE CRIMINAL PROSECUTIONS FOR SIMPLE MISTAKES – D&O COVERAGE USUALLY DOES NOT COVER CLAIMS FOR CRIMINAL CONDUCT!

  1. Conflict of Interests:

Legal Services: Section 718.111(3), prohibits a condominium association from hiring an attorney that represents that association’s management company. This law will require separate counsel management and an association when a claim is filed, it is anticipated that this change will increase insurance premiums.

Practical Note: Where both an association and the management company are sued for the same act, and there is an indemnity provision in the management contract, the attorney may be able to to serve as counsel to the management company in that action.

Unit Purchases:  Section 718.111(9) will prohibit a condominium association’s officers and directors, managers and management companies from purchasing a unit in a condominium at that association’s lien foreclosure sale, or as a result of a deed in lieu of foreclosure, except for timeshares.

Practical Note: Loophole – the statue does not prohibit the above individuals or entities from forming a separate entity (llc or corporation) to purchase a unit a foreclosure sale.

Employment and/or Contracts with Service ProvidersSection 718.112(2)(p) prohibits employment or a contract with condominium association service provider that is owned or operated by an officer or director or any person who has a financial relationship with a director or officer, or a close relative as defined, except if the ownership interest is less than 1%.

Practical Note: The term service provider is not defined. It is unclear whether the law was intended to apply to (handyman, receptionist, or other similar type of employee. The law also seems to directly conflict with Section 718.3027 (which appears to allow these type of contracts if approved by the BOD as set forth in Section 718.3027, Florida Statutes.

Management LimitationsSection 718.3025(5), prohibits a condominium association maintenance or management company, and directors and officers of those entities, from purchasing a unit in a condominium administered by the association at a lien assessment foreclosure sale or obtaining a deed in lieu of foreclosure. Management contracts may be canceled by majority of the unit owners other than the contracting party if the contracting party owns 50% of the unit.

Officer and Director ConflictsSection 718.3027, regulates a condominium association directors and officers’ conflicts of interest, including disclosure of “any activity that may reasonably be construed to be a conflict of interest.” A rebuttable presumption of a conflict is created under certain circumstances, such as an officer, director or relative of either: entering into a contract with the association; or holds an interest in an entity conducting business with the association. A contract proposal that would generate a conflict must be stated on the contract. If the board of directors votes against a contract with a related entity, then the director must provide a written disclaimer of intent to pursue the matter or “withdraw from office.” Noncompliance results in an automatic removal from office creating a vacancy. If there is a conflict to be considered by the association’s board of directors, the director and a director’s relative with the conflict may attend and present to the board; however, after the presentation, the director and relative must leave the meeting.

Practical Note: The Statue suggests that an association may enter into a contract for good and services with a director if the conflict is disclosed and if the BOD votes in its favor. However, this section does conflict with Section 718.112(2)(p) (presented above) which completely prohibits that type of contract. It is unclear at this time which section of the statue will control with respect to service contracts entered into with BOD member or BOD member’s family.

  1. RecordsSection 111(12) seeks to require bids to be kept as accounting recordsfor seven (7) years, rather than just one (1) year. Inspection of records is expanded to allow a member’s authorized representative to inspect. Renters will be able to review the association’s bylaws and rules. In addition to paper records, electronic records of voting are to be maintained for one (1) year.
  2. Websites for Official RecordsSection 111(12)(g) BY JULY 1, 2018 it is mandated that condominium associations governing 150 or more units, excepting timeshares, must have an internet site, upon which shall be posted digital copies, protected or restricted information redacted before posting of the association’s:
  • Governing documents including the rules and regulations;
  • Management agreement;
  • Leases and other contracts obligating the association or the unit owners;
  • Annual budget and any proposed budget to be considered at a meeting;
  • Financial report and any proposed financial report to be considered at a meeting;
  • Certification of directors;
  • All contracts or transactions between the association and any director, officer, corporation of the association;
  • Certain contractor documents regarding a conflict of interest;
  • Unit owner meeting notices, agendas and documents to be approved, no later than the 14 days before the meeting. The notice must be posted in plain view on the front page of the website, or on separate subpage of the website labeled “notices” which is conspicuously visible and linked from the front page. The association must also post on its website any document to bed considered and voted on by the owners during the meeting or any document listed on the agend at least 7 days before the meeting at which the document or the information within the document will be considered.
  • Board of directors’ meeting notices and
  • The Association shall ensure that the information and records described above, which are not permitted to be accessible to unit owners, are not posted or are redacted on the association’s website.
  • Website must be: independent website wholly owned and operated by the association; accessible through the internet and can’t be accessible by the general public;

Practical Note: Website should be ready by July 1, 2018. Your Attorney should be able to work with you to develop a template.

If the association utilizes a management company to provide the association with a website (as many do) the management contract must specify that the website belongs to the association and can not be shut down by the management company.

The administration of the website is regulated, including access of usernames and passwords to unit owners. Notice of meetings on a website may be set by association rule in addition to notice otherwise required which must follow the statutory e-notice requirements.

  1. Financial Reporting:

Financial StatementsSection 718.111(13), rescinds the small association, less than 50 units, option to prepare a report of cash receipts and expenditures in lieu of financial statements. If financial statements are not provided to an owner within five (5) business days of a written request, and if the Division of Condominiums confirms that failure, then the Division is mandated to require the association to provide the report within the next five (5)  business days. If the association fails to comply with the Division’s request, the association’s members may not waive a financial reporting requirement.

All associations large or small prepare financial statements now, based on revenue, unless waived in advance by the members.

Practical Note: In some cases this will need to be prepared by a cpa and will increase costs for the association that need to be budgeted.

Finances: Section 718.71, is created to require condominium associations to file an annual report with the Department of of Business and Professional Regulation (DBPR) including the names of the association’s financial institutions which report may be also be obtained by members from DBPR.

Debit CardsSection 718.111(15) prohibits condominium associations from using debit cards, and if a debit card is utilized for a “not lawful obligation” the user may be prosecuted as credit card fraud per Section 817.61.

Practical Note: Credit Cards are permissable

  1. Term Limits/ElectionsSection 112(2)(d), prohibits a condominium association director from serving more than four consecutive two-year terms unless: two-thirds of all voting interests approve, or there are not enough eligible candidates. This may lead to amendments rescinding staggered two-year terms.

Practical Note: There is no express prohibition on the length of time a director may serve one-year terms. Another issue is whether the the new law is intended to be applied retroactively or prospectively beginning with terms starting July 1, 2017. If applied prospectively then the prohibition would begin in 2025 if retroactively applied many of the terms may have terminated and/or expired.

  1. RecallSection 112(2)(j) requires a recalled director to provide records and property within 10 business days after the vote. Assuming the Legislature did not intend for a properly elected director to be removed based upon an insufficient petition, for example not containing enough signatures, the changes would appear to push associations to file a lawsuit seeking a declaratory judgment because the recall arbitration process in the circumstances has been rescinded. 

The statue no longer requires the Board to “certify” or “not to certify” the recall, but still makes reference to a board filed petition for recall arbitration.

Practical Note: This is a very confusing provision in the new law. The intent seems to be to make recalls effective immediately upon receipt of the recall petition by the board. The statue also requires that the individual board members who are recalled to file a petition for arbitration if they believe the recall to not be effective. Nevertheless, it is unclear whether the statue requires the board to accept the recall petition that on its face is invalid, or that is not properly executed/signed by a majority of the owners. This law will most likely lead to many legal issues.

  1. ArbitrationSection 1255(4) allows for private arbitrators, generally credentialed bar members don’t have to be employed by the division. An arbitrator under this provision must provide a hearing within 30 days of being assigned or entering into a contract unless the petition is withdrawn or a continuance is granted, and arbitration decisions shall be rendered within 30 days after the final hearing or suffer the cancellation of the arbitrator’s certification.
  2. Voting Suspension:  Section   303(5)   permits   suspension   of   voting   rights   when   an condominium unit owner’s monetary obligations to the condominium association are more than $1,000 and more than 90 days delinquent.

Proof of such monetary obligation must be provided to the unit owner or member 30 days before such suspension can be effective.

  1. ReceiversSection 303(8) prohibits a receiver from exercising unit voting rights when the a condominium unit is in receivership.
  2. OmbudsmanSection 5012(5) is expanded to allow  the  Condominium  Ombudsman  to review secret ballots cast at an association meeting.
  1. Condominium Termination SB 1520, Florida Statue 718.117

This change is to clarify existing law and are remedial in nature. Optional terminations are required to be approved by the Division of Condominiums. The Division’s examination to confirm procedural sufficiency shall be completed and reported to the petitioner within 45 days of receipt, and if not, then there is a presumption of acceptance. As part of the clarification process the law is stated to apply to all condominiums. The Division is provided a budget for hiring a full-time employee to assist in implementation. 80% of the voting interests may approve a plan of optional termination, regardless of what a condo’s governing documents may provide. However, if 5 % or more of the voting interests reject the plan of termination, the plan may not proceed. Previous law provided for 10% or more of the voting interests to reject the plan.

Some other important points:

  • If rejected then a subsequent plan for termination may not be considered for 24 months.
  • Optional Termination is not permitted until 5 years after the recording of the declaration of condo, unless there is no objection to the plan.
  • In the event of optional termination, all persons whose condo unit is their homestead and who are current in the payment of both assessments and monetary obligations to the association must be paid at least the original purchase price paid for their units.

2016 Flashback

  1. HB 431(Fire Safety) became law July 1, 2016, amending Fla. Stat. §§633.202 633.208.
  • Revised 633.202 and 633.208 with regard to certain structures located on agricultural property which are exempt from Florida Fire Prevention Code.
  • Required that certain structures used for agritourism activity be classified.
  • Provided criteria for such classifications; provided that certain structures are subject to annual inspection.
  • Specified applicable fire prevention standards; required that State Fire Marshal adopt rules.
  • Revised certain dimensions of tent that is exempt from code.
  • Required that State Fire Marshal adopt rules; authorized local fire official to consider specified publication when identifying an alternative to fire safety code.
  1. HB 535 (Florida Building Code) became law July 1, 2016  468.609 and various sections of Ch. 489 and 553.
  • Revised provisions related to Florida Building Code.
  • Revised provisions regarding Florida Building Code Compliance and Mitigation Program.
  • Restricted application of Florida Building Code for certain aspects of construction.
  • Revised provisions related to portable pools.
  • Revised provisions regarding Florida Homeowners’ Construction Recovery Fund.
  • Revised minimum requirements for certificate of completion for residential swimming pools.
  • Revised provisions regarding authority of building officials to issue building permits
  • Revised provisions regarding appeal boards; revising provisions addressing certain fire service access elevators.
  • Created task force to study electrical safety in swimming pools.
  • Created construction industry workforce task force to study issues associated with training of construction workforce.
  1. HB 931 (Citizens Property Insurance) became law July 1, 2016  amending Fla. Stat. §627.351
  • Clarified that a consumer representative appointed by the Governor to the Citizens Property Insurance Corporation’s board of governors is not prohibited from practicing in a certain profession if required or permitted by law or ordinance.
  • Revised the requirements for licensed agents of the corporation
  • Revised provisions related to the corporation’s use of certain public and private hurricane loss-projection models in establishing certain rates
  • Revised a provision to permit specified information from certain underwriting and claims files to be made available to certain entities.
  • Provided limitations for the use of such information by the entities, etc.
  1. HB 965 (Fire Safety) became law July 1, 2016
  • Revised fire safety standards for assisted living facilities & provided exemption for certain assisted living facilities under certain conditions.
  • State Fire Marshals are now authorized to use the most current edition of the National Fire Protection Association (NFPA) Life Safety Code, 101 and 101A, in determining the uniform safety fire code adopted for Assisted Living Facilities (ALFs).
  • Amended Fla. Stat. §429.41, F.S., to repeal current fire safety requirements for ALFs that utilized previous editions of the NFPA Life Safety Code, including NFPA 101, 1994 edition.
  • Permits ALFs that have a building permit or certificate of occupancy issued before July 1, 2016, to remain under the provisions of the 1994 and 1995 editions of the NFPA Life Safety Code. Such facilities may make repairs, modernizations, renovations, or additions to or rehabilitate the facility in compliance with the 1994 and 1995 editions, as applicable. A facility must comply with the current NFPA Life Safety Code if it underwent (or undergoes)  a Level III building alteration or rehabilitation under the Florida Building Code or seeks to utilize features not authorized under the 1994 or 1995 editions.
  • Removed the requirement that the Office of the State Fire Marshall provide specified training and education to the Agency for Health Care Administration employees and local government inspectors.
  • Prohibits a local government or a utility from charging fees in excess of the actual expenses incurred in the installation and maintenance of an automatic fire sprinkler system in an existing ALF.
  1. SB 184 (Military and Veterans – Rentals) became law July 1, 2016 (creating Fla. Stat. §83.683)
  • Provided that a landlord is required to process a rental application from a military servicemember within seven days of submission, if the landlord required an application before residing in a rental unit.
  • Within that seven day period, the landlord must provide the servicemember with a response in writing of the approval or denial of their application and, if denied, the reason for denial.
  • Should the landlord not provide a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are met.
  • Applies in situations in which a servicemember seeks to rent a unit or parcel within the control of a condominium association, cooperative association, or homeowners’ association.
  1. SB 1174 (Community Residential Homes) became law July 1, 2016
  • Provided details as to the applicability of sitting requirements for community residential homes and the applicability with respect to local land use and zoning, etc.
  • Clarified the definition of a community residential home as being a home consisting of 7 to 14 unrelated residents who operate as the functional equivalent of a family, including such supervision and care by supportive staff as may be necessary to meet the physical, emotional, and social needs of the residents.
  • A community residential home may not be constructed within a radius of 1,200 feet of another such home or within a radius of 500 feet of an area of single-family zoning.
  • Similarly, a home of six or fewer residents which otherwise meets the definition of a community residential home may not be constructed within a radius of 1,000 feet of another such home.
  • The law is silent as to which zoning requirement applies when determining the proper distance between a community residential home licensed for 7 to 14 residents and a home licensed for 6 or fewer residents which otherwise meets the definition of a community residential home.
  • Required that a radius of 1,200 feet between a community residential home licensed for 7 to 14 residents and a home licensed for 6 or fewer residents which otherwise meets the definition of a community residential home.
  • The amendment does not impact community residential homes already licensed and in operation prior to July 1, 2016.

Erum Kistemaker Named Influential Woman in Business

Erum Kistemaker, managing partner of Kistemaker, was recently honored in the 23th annual edition of the Volusia/Flagler Business Report’s “Influential Women in Business.”

According to the publication owned by the Daytona Beach News-Journal, each year they “recognize some of the many women in Volusia and Flagler Counties who are making a difference, both professionally and in their community.

Over the years, more than 200 women have received this honor, some more than once.

The honorees through the years have ranged from small business owners to executives of major corporations as well as nonprofit executives and local government, education, chambers of commerce and trade association leaders.

Many have achieved great success in their careers while also raising a family. Many, including some of this year’s honorees, also overcame tremendous adversity and in some cases personal tragedies.

The one thing all have in common, in addition to being accomplished, is a commitment and passion for bettering the lives of those around them as well as the community.”

The women, including Erum, were honored at a special “Influential Women in Business Luncheon” held on Sept. 27 at The Shores Resort & Spa in Daytona Beach.

Attorney-Client Privilege: Are Attorney Communications Received by, or Copied to, an Association’s Manager Privileged?

A recent Florida appellate decision reminded us of the importance of understanding attorney-client privileges when communicating with community association clients through their manager. Under the evidence code, a client has a privilege to refuse to disclose, and to prevent any other person from disclosing, the contents of confidential communications when such other person learned of the communications because they were made in the rendition of legal services to the client.

In the community association context, managers serve unique roles with associations serving as the primary point of contact between the board of directors and their attorney. When the manager is “cut out” to assure no challenge to the attorney-client privilege it makes dealing with the board more difficult. Although some communities have strong board leadership, in most others the manager’s involvement is essential in most every decision.

In the case of Las Olas River House Condominium Association Inc. vs. Lorh, LLC, 2015 WL 8347977 (4th DCA 2015) the condominium association’s attorney-client privilege came under fire. The corporate owners of two units in Las Olas River House condominium (plaintiffs) brought a suit after years of contention between them and the condominium association, during which they repeatedly threatened to sue the association and its directors and agents. In the course of discovery, plaintiffs propounded requests for production of communications between the association and its attorney that mentioned the plaintiffs. The association objected asserting the attorney-client privilege. On its face, this seemed like an obvious case of privileged documents. However, because the communications were received by, and copied to, the association’s manager and his supervisor, the plaintiffs argued the attorney-client privilege was waived.

The condominium countered arguing the scope of a community association aligns it more with a corporation than an individual and a community association manager’s contractual duties require them to communicate with an association’s legal counsel on their behalf. They further explained the manager’s role in keeping the association’s counsel informed of day-to-day events that may lead to their need for legal services. Without the manager the board of directors would have no point of contact with their legal counsel.

The trial court disagreed and rejected the privilege reasoning the manager and supervisor were not “employees” of the association within the meaning Southern Bell Telephone & Telegraph Co. v. Deason, 632 So.2d 1377 (Fla.1994). The condominium appealed the decision.

The appellate court reversed the trial court’s ruling and sent the case back to the trial court to analyze, using the 5 prong Deason test, the extent of the condominium’s privilege in the corporate context.

The Deason court set forth a five-part test for determining whether a corporation’s communications are client-attorney privileged:

  1. whether the communication would not have been made but for the contemplation of legal services;
  2. whether the employee making the communication did so at the direction of his or her corporate superior;
  3. whether the superior made the request of the employee as part of the corporation’s effort to secure legal advice or services;
  4. whether the content of the communication relates to the legal services being rendered, and the subject matter of the communication is within the scope of the employee’s duties; and
  5. whether the communication is not disseminated beyond those persons who, because of the corporate structure, need to know its contents.

A ruling by the trial court applying the Deason test has not yet been issued, but when you read each prong of the Deason test, one can anticipate many situations involving privileged communications with management companies where a court could find the privilege waived. For example:

  1. communications with persons other than the CAM (his/her secretary, other employees of the management company, management of the management company, etc.); and
  2. failure to have a clear written agreement as to the role of the manager in the legal affairs of the association.

This is an issue associations, managers, and their legal counsel should consider carefully to establish appropriate procedures and policies to ensure the preservation of critical lines of communication and protect privileged communications with legal counsel. At a minimum, community associations and management companies should consider amending their management agreement to specifically address the manager’s role in the receipt and transmission of confidential communications and communication with counsel, including a provision that such communications will not be shared within the management company without the association’s prior consent.

If you have questions about this case, or issues surrounding the client-attorney privilege, you should immediately consult with your association’s legal counsel.

Community Association 2017 Legislative Update

The most important aspect of this bill is that the year-end financial reporting exemption for associations that operate fewer than 50 units or parcels (small hoa’s or condos) are eliminated. Previous to the enactment of this law, these type of smaller associations were not required to prepare a year-end annual financial report based on revenues, but rather, could prepare a report of cash receipts and expenditures. That exemption is now GONE.

Now, all associations must prepare a financial report based on annual revenues, regardless of the number of units or parcels. As a reminder, the following thresholds are contained in the law:

  • An association with total annual revenues of $150,000 or more, but less than $300,000, must prepare compiled financial statements.
  • An association with total annual revenues of at least $300,000, but less than $500,000, must prepare reviewed financial statements.
  • An association with total annual revenues of $500,000 or more shall prepare audited financial statements.
  • An association with total annual revenues of less than $150,000 is only required to prepare a report of cash receipts and expenditures.Further, for condominium and cooperative associations, HB 6027 also deleted the limitation on the number of times an association can waive its financial reporting requirements.Previously, condominium and cooperative associations could not waive the statutorily required financial reports for more than three consecutive years. This provision has now been deleted, although there is a bit of a glitch in the statutes since HB 6027 removed the provision, while HB 1237, which also amended these sections, left them intact. It remains to be seen how the official version of the Florida Statutes, which is due to be released in the next couple of months, will address this conflict.

It’s Time to Update Your Governing Documents

Please note, this time of year many associations consider amending and updating their governing documents. It is extremely important that every homeowners’ association document be reviewed to determine that they have not expired.

Homeowners’ association documents may be affected by the operation of the Marketable Record Title Ac (MRTA), which is Chapter 712, Florida Statutes. MRTA can extinguish certain documents (DECLARATION) that are 30 years or more old.

It is important  for associations to periodically review the community’s governing documents with an attorney. While your condominium documents are probably not invalid, they could be ancient in practice and not harmonious statutory provisions.