More and more, insurance companies that provide unit owner insurance are suing community associations to recover payments made to the unit owner that are related to water leaks in the unit. These type of lawsuits are problematic. First, the insurance companies are waiting years to bring them, although still within the statute of limitations for the lawsuit, but nonetheless to the detriment of the community association’s defense of the case as records and memories fade overtime. Secondly, the cases are many times brought in small claims court as a result of the insurance company seeking at most $5,000.00 in “reimbursement” from the community association.

The issue with defending a small claims court case is that the cost of defending the lawsuit can be more than the amount the insurance company is seeking which puts pressure on the community association to simply settle. The basis of the insurance company’s lawsuit against the community association is negligence; the insurance company claims that the association had a duty to take some action, failed to take the action and such a failure led to loss that resulted in the insurance payment to the unit owner.What can be done to limit a community association’s exposure to such lawsuits? First, the community association should consult with its attorney to determine if an amendment to the declaration for the association should be adopted related to subrogation.

Next, community associations need to promptly respond to complaints related to leaks and properly document repair work in a detailed manner so that the location and extent of work is easily understood. The documentation related to repair work should be kept for seven years and be readily accessible. Community associations should perform routine maintenance and inspections of property that the association is required to maintain in order to identify in advance of a water leak areas of needed maintenance. Anytime there is a water leak or other casualty to unit, the association must thoroughly document, in writing, what happened to cause the leak, what was done in response to the leak and all communications between the association, the unit owner and the unit owner’s insurance company and adjuster. Such documentation should be shared with the community association’s attorney and kept in the association’s official records.

If a unit owner does not pay his or her assessments, the condo association has the power to file a claim of lien and, ultimately, foreclose on the unit. But in order to do the above, the condo association must strictly comply with the statutory pre-conditions and requirements which follow:

1 – Perfecting the Lien: Call or send a nice Reminder/Demand Letter (Optional)
Contact the owner And let them know they are late in paying their assessment. This simple step may result in the unit owner paying all amounts due and owing, without any additional action required by the association.
 2 – Notice of Intent to Record a Claim of Lien (mandatory pre-condition)
A notice of intent to lien is a formal statutory letter sent to the delinquent unit owner stating the association’s intent to place a lien on the unit for the owners failure to pay assessments. The notice of intent to lien must be delivered to the owner of the unit by both registered or certified mail, return receipt requested, and first-class United States mail to the owner at his or her last known address as reflected in the records of the association. If the address reflected in the records of the association is not the condominium unit address, the notice of intent to lien must also be delivered to the owner at the address of the unit. Delivery of the notice is deemed given upon mailing. § 718.121(4), Fla. Stat. The association must give the owner thirty (30) days to pay the outstanding balance before proceeding to the next step.
3 -Record the Claim of Lien
Thirty (30) days after sending the notice of intent to lien, the association can record the claim of lien in the public records. § 718.121(4), Fla. Stat. In Florida, the claim of lien must be drafted by an attorney because a legal description is required and it creates property rights. To be valid, the claim of lien must include:
• a legal description of the condominium parcel;
• the name of the record holder;
• the name and address of the condominium association;
• the amount due;
• the due dates; and
• it must be executed and acknowledged by an officer or authorized agent of the association.
The claim of lien secures all unpaid assessments that are due and that may accrue after the lien is recorded through the entry of final judgment, as well as interest, administrative late fees, and all reasonable costs and attorney fees. § 718.116(5)(b), Fla. Stat. The claim of lien is only valid for one (1) year after it is recorded. In other words, a legal action to foreclosure the lien must be commenced within one (1) year of filing the claim of lien.
If the unit owner pays the amount owed in full, the owner is entitled to a filing and recording of a “Release of Lien” in substantial compliance with the form found in in § 718.116(5)(d). The unit owner may contest the lien by filing a “Notice of Contest of Lien.” If the unit owner files a Notice of Contest of Lien, the association must commence a legal action to enforce the lien within ninety (90) days from the date the association received such notice. If the association does not commence an action within that ninety (90) day period, the claim of lien is voided. § 718.116(5)(c).
4 – Notice of Intent to Foreclose the Lien
The condominium association must provide written notice to the unit owner of its intention to foreclose its lien thirty (30) days before filing a lien foreclosure action. The notice must be delivered by physically delivering a copy to the unit owner, or by certified or registered mail, return receipt requested, addressed to the unit owner at his or her last known address. The notice is deemed to have been given at the time of mailing. § 718.116(6)(b).
5 – Foreclose the Lien
Thirty (30) days after the condominium association provided written notice of intent to foreclose, the association may bring a legal action in its name to foreclose the lien in the same manner a mortgage of real property is foreclosed, and may bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien. The association is entitled to recover its reasonable attorney’s fees incurred in either action. § 718.116(6)(a). At the foreclosure sale, the association has the power to purchase the condominium unit and to hold, lease, mortgage, or convey it. § 718.116(6)(d).

A hot topic and contested matter I face often with homeowners’ and condominium associations is the association’s ability to place restrictions on property transfers. In simple terms the ability to approve or disapprove of the sale and lease of units or homes in a residential community. Those who challenge restrictions on property transfers allege their right to transfer their property is being unreasonably restrained.

Restrictions that unreasonably restrain the right of a property owner to transfer his or her property are known as unreasonable restraints on alienation.

Condominium associations are limited by statute on the amount of fees which can be charged in connection with the transfer of a unit. 

The condominium association must have the right in its governing documents to approve a sale, mortgage, lease, sublease, or other transfer of a unit, in order to charge a fee in connection with such transfer. In addition, Section 718.112(2)(i), Florida Statutes provides that no such fee shall exceed $100 per applicant other than husband/wife or parent/dependent child, which are considered one applicant. This $100 state-mandated cap includes all non-refundable fees charged for interviews, background checks, credit reports, and other costs when people seek to buy or lease a condominium unit in Florida.

This transfer fee should not be confused with a security deposit which may be required, in addition to the transfer fee, if the authority to do so appears in the declaration or bylaws. The amount of the security deposit is also subject to statutory limitations. Section 718.112(2)(i), Florida Statutes provides that an association may, if the authority to do so appears in the declaration or bylaws, require that a prospective lessee place a security deposit, in an amount not to exceed the equivalent of one month’s rent, into an escrow account maintained by the association. This security deposit is intended to protect against damages to the common elements or association property.

A security deposit is to be held by the association and returned to the tenant when the lease is up if the common elements were not damaged by the tenant.