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“Back to Basics,” FCAP Managers Report

There are articles every month covering community association issues, which you can find from a plethora of sources. This magazine, other similar magazines, national magazines, newspaper articles, everyone’s favorite blog, attorney resources, Internet, etc. Most of these articles deal with specific issues, such as short term rentals, or emotional support animals, or the latest case law and how it applies in general to associations, and other specific issues. I want to go back to some of the basic tenants of association operations, back to many items that are not discussed on a day to day basis, but which can, and do, lead to problems and issues in community associations.

I want to discuss items that appear to be so basic, board members and managers overlook them, take them for granted, misconstrued how such items are to be handled or just plain forgot how to deal with such basic issues.

Proxies

Limited proxies are required to be used for many things in condominiums, such a voting on proposed amendments, waiver of reserves and waiver of financial reporting requirements, to name a few.  When the limited proxies are turned in to the association, either via mail or in person, they are not required to remain sealed until the meeting, like election ballots.  Proxies should be opened and tallied as they come in; this way the association knows where it stands in regards to the proxy vote before it calls the meeting to order.  This can save the association a lot of time at the meeting that is spent finally opening and tallying all the proxies at the meeting.  You do not need a special meeting, committee, open the proxies in front of everyone at the meeting, etc., as is required with condominium election ballots.

The same theory holds true for proxies in homeowner association elections, which, unlike condominium associations, can be used for the election of directors unless the governing documents provide otherwise.  There is no requirement that homeowner association election proxies can only be opened at the election meeting, unless the governing documents provide otherwise.  Save some time at your meetings – open proxies in advance of the meeting and keep a running tally.

Rules

In my experience board members and managers have more trouble in properly amending and passing rules as any other topic.  There are many subtleties and complexities when discussing an association’s rule making powers, and an association should never attempt to undergo rules changes without consulting its attorney.

The first thing to look at is if the Board has the authority to pass rules and regulations.  While most documents grant such authority, some do not.  If the Board is not granted the authority in the governing documents to pass rules, it has no authority to do so.  So while most documents do contain such authority, just make sure yours do so.

Some documents state that the Board has the authority to make rules regarding the use of the common elements.  Common areas does not include the units.  So if your documents only allow the Board to pass rules regarding common elements, the Board cannot pass rules regarding unit use, such as quiet hours, limiting work hours in the unit, arguably guest restrictions, etc.

A few association documents require the members to approve all changes to the Rules. Obviously this can be problematic.  It is more of a problem if you have such a requirement, it is not followed, and then an owner challenges the Board’s attempted enforcement of an improperly passed rule.

Assuming the Board has the authority to pass rules, changes in a rule regarding unit use requires a fourteen (14) day posting and written (or electronic if authorized) notice to owners regarding the proposed rule change.  I have seen many rules invalidated because the requirement was not followed.

Finally, as a general overview, any rule must be reasonable.  Who decides what is reasonable?  Ultimately a judge or jury, which is a situation you do not want to be in, where a judge or jury is making such a determination.  Word to the wise – check with your association attorney when considering adopting or amending rules and regulations.

Contracts/Notice of Intent

Obviously most contracts (especially those in excess of $10,000.00) should be reviewed by the association’s attorney before being executed by the Board.  Sometimes a contractor will ask the association to sign a notice of intent, which, according to the contractor, merely puts the contactor on notice that the association intends to sign a contract without actually signing the contract yet.  DO NOT SIGN such a notice of intent without running it by the association attorney first.  Most notices of intent are, in fact, a form of a binding contract, and provide for penalties and payments in the event the association does not, eventually, sign a contract.  Any time a vendor tells you that it is not necessary to have your attorney review such a “simple” document, a red flag show go up in your mind.  I have seen this become more prevalent recently in regard to rooftop leases for cell towers.  I through reading of the notice of intent revealed the association was locking itself into a 99 year lease with the vendor.  I do not think or advise, that any association would want to enter into such an agreement without its attorney reviewing such a document.

Please be extremely careful before signing a one page contract that has print so small on the back of the page that it is hard to read even with a magnifying glass (I am not exaggerating).  Many of these types of “simple” contracts (telephone systems, garbage removal / dumpsters, etc.) are simple only for the contractor, as they lock an association into the vendor’s right of first refusal, automatic renewals, etc.

Running an association is not easy for volunteer board members, and is not easy for trained, professional managers either.  Do not make the job harder than it already is, and open the association up to criticism of legal action, over simple, day to day matters.  Don’t be afraid to ask your professionals for help, and don’t be penny-wise and pound foolish when it comes to seeking legal advice to help with association operations.

“Committee Conundrum Explored,” News-Press

Q: A director on our condominium board recently resigned, but would still like to volunteer on a committee. Is this permissible? (S.F., via e-mail)

A: I believe so, but the law is a bit of a mess.

Section 718.103(7) of the Florida Condominium Act defines a “committee” as “a group of board members, unit owners, or board members and unit owners appointed by the Board or a member of the board to make recommendations to the board regarding the proposed annual budget or to take action on behalf of the board.” Such committees, sometimes called “statutory committees,” may clearly contain both (or either) board members and non-board members.

With one exception, the composition of other committees, sometimes called “non-statutory committees,” is not addressed in the Florida Condominium Act. The exception if for what is often called the “fining committee” (sometimes called “compliance committee). Section 718.303(3)(b) of the Condominium Act prohibits board members from serving on this committee.

Section 617.0825 of the Florida Not For Profit Corporation Act authorizes the appointment by a majority of the board “from among its members,” an “executive committee” and “one or more other committees.” Unless restricted by the articles of incorporation or bylaws, the executive committee and these “other committees” may be delegated the powers of the board of directors, subject to certain exception set forth in the statute, such as the inability to fill vacancies on the board. The corporate statute does not appear to authorize or contemplate committees that are not comprised entirely of board members.

So the “glitch” in the law is that there is no clear path in the statutes for persons who are not board members to serve on condominium association committees unless it is the fining committee or a “statutory committee” (budget committee or committee empowered to “take action”). It is unclear where this leaves most “non-statutory” committees, which are typically advisory to the board, and usually include (and sometimes entirely consist of) people who are not on the board.

Most bylaws probably fill this gap, and well written bylaws should be carefully drafted to address this issue. I do think this is a “glitch” in the law that needs to be fixed.

Q: When I purchased my condominium unit, the assessments were paid quarterly. Recently, the board has stated that assessments must be paid monthly, and have also stated that any payment not paid within 10 days of their due date is subject to late fees, interest, and referral to an attorney for collection. Can the board make these changes without seeking membership approval? (A.S., via e-mail)

A: Possibly. The Florida Condominium Act states that the payment of assessments may not be any less frequently than quarterly. In practice, this means that the two options are quarterly or monthly.

Your condominium documents should address the issue. If your documents specifically state that assessments must be monthly or quarterly, the board could not make that change without an amendment to the documents. Many documents state that the board may determine the payment schedule for assessments and specifically authorize the board to choose monthly or quarterly payments.

The statute likewise does not define when a payment is “delinquent.” That is typically determined by the condominium documents. While I have seen many different documentary provisions, 10 days is a frequent standard. Adding late fees also requires authority in the condominium documents.

Community Update – November 2019

As we prepare for the holidays and other year-end festivities, associations are also beginning to look ahead to the needs and demands of the coming year. This month’s edition explores some of the issues that associations may encounter from time to time and discusses best practices for putting your community’s best foot forward.

If your association is taking the time to thoughtfully create a name and logo, it only makes sense to protect that investment. This month’s featured article, “Why Should Your Community Consider Trademarking Its Name and Logo?”addresses this issue.

Does an owner signing a secret ballot invalidate their vote? Find out in, “Are Signed Condominium Election Ballots Valid?”

Have you had a poor experience with a vendor and now want to sound the horn so others don’t fall victim to same? Our third article, may give you pause. Learn how your association can protect itself from a defamation claim, in “Say What?”

Read our fourth article, “The Use of a Power of Attorney to Document at Association Meetings and Elections,” for an explanation of the limitations of a POA.

As a board member, you may be using your personal phone to conduct association business. But, did you know that in the event of a lawsuit you may be required to turn over your phone for e-discovery – meaning in addition to business information, your personal information could be exposed as well? Read our last article, “Dos and Don’ts for HOA Board Members When It Comes to E-Discovery,” for tips on how to protect your personal information.

Episode 11: Adjacent Development Planned Next to Community – “Can They Do That?”

There’s a developer that wants to build a brand new neighborhood right next to ours, but we’re worried it’s going to be disruptive. Can we oppose the development? Find out the answer in this month’s episode!

When it comes to association rules and bylaws, there seem to be more questions than answers. Becker’s video series, “Can They Do That?” tackles some of the unique problems that homeowners and renters face today. We answer questions, no matter how far-fetched they may seem. From service animals to nudists in your community, we get to the bottom of it and let you know – “Can They Do That?”

Don’t miss out on new episodes of “Can They Do That?” Subscribe to Becker’s YouTube channel!

To view previous “Can They Do That?” episodes click here!

 

Why Should Your Community Consider Trademarking Its Name and Logo?

Many communities rely upon name recognition and a certain style logo to attract attention from potential new purchasers as well as to enhance real property values for existing owners. I live in a country club community that has a distinct font and logo which is intentionally highlighted on our association website, advertisements, business cards, stationary, and, naturally, our community signage. For the sake of this blog, we will call my community Ridgeview Golf Estates. We have spent considerable effort and money over the years to build a certain mystique around the name and the look. What we failed to do, however, was to register the name and logo as our trademark and, as a result, we have had businesses in the vicinity trade on our good name over the years to the point that we now have the Shoppes of Ridgeview Golf Estates (with some less than desirable stores) and neighboring communities who use Ridgeview Golf Estates in their name even though they are not affiliated with my community. Often, well-known communities wind up with local realtors, security and pool companies, and other vendors incorporating the community name into their business name in order to trade on the community’s brand and reputation. By putting their names in the public eye, such exposure can give rise to trademark rights for these businesses which a community can later find difficult to challenge and can also make it harder for a community to later trademark its name in the face of these other trademark rights.  

Are Signed Condominium Election Ballots Valid?

For the most part, voting in a condominium election is supposed to be by secret ballot but many times owners sign their ballots. Does this invalidate the ballot? No, it does not. This issue was addressed in the arbitration case of Alvarez v. Club Atlantis Condominium Association, Inc. In this case an association rejected ballots because either the owner signed the ballot, signed the “inner envelope”, or signed both. The association claimed this violated the Condominium Act as well as the association’s own voting instructions, all of which required secret ballots and a specific procedure for balloting.  The arbitrator stated “that the secrecy of the ballot is designed primarily to benefit the individual voter. Since it is a personal privilege, that privilege may be waived by the individual voter.  The unit owners in this case, by signing the ballots or inner envelopes, waived their right of secrecy provided for in the statute and rules.” Keep this in mind when handling your next condominium election.

The Use of a Power of Attorney Document at Association Meetings and Elections

A power of attorney (“POA”) is a legal document delegating authority (specific rights set forth in the POA) from one person (the principal) to another (the agent). Association boards and managers may have encountered these from members who wish to designate someone else to act on their behalf and many questions arise as a result. Are there any limits? Does this document give someone outside the membership the authority to attend meetings or to vote in elections? In almost all circumstances an association should reach out to its general counsel as there are legal requirements which must be met before accepting a POA.

Dos and Don’ts for HOA Board Members When It Comes to E-Discovery

You were just elected as a member of the board for your association and with that election comes a series of responsibilities. With so many people living in your building, along with those who service the building, odds are you may deal with a legal issue or two during your tenure. If any of these legal issues turn into an actual lawsuit, do you know what information will be collected during the lawsuit? Do you know how to protect your privacy from being exposed in a legal case?

Associations Being Threatened with Website Litigation

If your association currently has a website (one you own or one which has been provided to you by your management company) or you are in the planning stages of creating an association website, please read this CALL Alert thoroughly as it contains important information for you. If you don’t have a website, feel free to skip to the last two paragraphs in this alert!