As with many Florida communities, my HOA Board had questions in the aftermath of Hurricane Irma. Would FEMA pay to pick up all our debris, when should the security guards be asked to return to duty and could we tap into reserves without a membership vote to pay for storm repairs? Here are a few other questions, I’ve received from associations statewide who are grappling with the issues presented by a storm like Irma.
Q: We signed up with a Public Adjuster right after Irma but we are now not happy with his contract. It looks like we are being charged 15% of any recovery we receive. Are we stuck?
A: Under section 626.854(6), F.S., you have five (5) business days to to cancel a Public Adjuster contract without penalty or obligation. Also under section 626.854(10)(b)(1), a public adjuster cannot charge more than 10% of the amount of the insurance claim for events that are the subject of a declaration of a state of emergency by the Governor. The Governor declared a state of emergency for all 67 counties prior to Irma.
Q: One of our board members who always is a problem wants to hire someone she knows who is “great” to handle several repairs we need post Irma but this contractor is not licensed to perform work in Florida. What can we say to shoot this idea down?
A: Here are some of the risks associated with hiring unlicensed contractors:
The contractor lacks proper qualifications and, as a result, performs poor quality work in your community.
The contractor lacks insurance and thus provides no protection for your association should individuals be injured or property damaged during the course of the contractor’s performance.
The contractor may have a criminal background which explains the lack of licensure.
The contractor may not comply with applicable building codes.
The DBPR also says to watch for “red flags” that indicate you may be dealing with an unlicensed contractor. Some of these include:
A claim to be “licensed and insured” but the contractor cannot produce a license
The contractor wants all or most of the money up front or will only accept cash
The contractor wants a check written to them individually or to “cash”
The contractor wants to proceed with an oral agreement only
The contractor simply showed up at your property to solicit your business.
For the complete list of red flags, please visit: http://www.myfloridalicense.com/dbpr/reg/ula-consumer-tips.html
It is noteworthy that hiring an unqualified contractor and potentially squandering your insurance proceeds exposes the individual board members to potential personal liability. Please be sure to visit your City’s website to confirm whether or not the contractor you are considering is properly licensed in both Florida and in your City.
Q: We have a number of units in our building which we believe have water damage thanks to Irma. We would like to go in and inspect these units and dry them out. However, we have several uncooperative owners who are refusing to allow us in and to pay for these services. What should we do?
A: Sections 718.1265, 719.128 and 720.316, Florida Statutes, grant boards emergency powers so long as an official state of emergency exists in Florida. Among those powers is the right of the Board to enter into units/homes to assess water damage, to remove water-soaked items such as carpeting, furniture, etc. and to seek reimbursement from the owners for those costs. Should an owner refuse to properly reimburse the association for those costs, the association may enforce its right of access, perform the required repairs, and lien the unit for any costs advanced.
Q: Our high-rise condominium recently transitioned from developer control. We have not yet hired an Engineer to confirm whether or not we have any construction defects in our building. Now that Irma has done some damage to our roof and windows, is our construction defect claim going to be impacted?
A: Developers and contractors will certainly use the hurricane as the cause of any and all exterior wall/window/roof issues. Conversely, if the building manifested no problems as a result of the storm, the developers and contractors will point to the building’s performance to prove that there are no defects. If your building was only minimally impacted by the hurricane, you should proceed expeditiously with your Engineer’s Report to document your building’s condition particularly as we are still in the midst of hurricane season.
If your building was impacted by the storm and a claim is made then construction defects may be an exclusion in the policy. There’s some recent case law that says that such an exclusion may not be applicable in a concurrent causation setting but the analysis would have to be very carefully done on a policy-by-policy basis.
Q: I read that the IRS is extending the time for filing a tax return for individuals in certain areas impacted by Hurricane Irma. Would this apply to our HOA as well?
A: The IRS announced an extension for victims of the storm in parts of Florida and elsewhere who will now have until January 31st, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that run out on October 16th, and businesses with extensions that run out on September 15th, 2017. Even though most community associations file relatively simple tax returns, your Florida HOA should have additional time to file under this program.
Please note, however, that this extension does not apply to the payment of taxes which were originally due on April 15th, 2017.
Q: I am the Treasurer for my HOA . We took out a $2.3 million dollar loan for a clubhouse renovation project. We’ve been paying off that loan. Should we start including some sort of forbearance period when a state of emergency has been invoked? Associations in SW FL and elsewhere will also experience slower than usual assessment payments. Some of those communities might run into a default with their loan repayments as a result for the first time in their history. I don’t want to have to rely on a bank’s goodwill in this kind of situation.
A: Irma has taught many of us painful lessons not the least of which is the need to address possible hurricane damage in your more important contracts/agreements. Most loan documents grant a very tight grace period after which significant interest and late fees start accruing but do not grant an association forbearance in terms of making loan payments in the event of a disaster. However, as impacted associations know, Irma will likely delay timely payment of regular and special assessments for weeks or months to come as owners grapple with the costs associated with necessary storm repairs.
Most banks want to work with their customers and do not want to deal with defaults so If your loan documents do not address this challenge, I would suggest you contact your banking representative to have a discussion. Failure to pay on time, however, without specific approval from the Bank will likely result in a default under the loan documents, potential acceleration of the balance, and an increase in interest rate to the default rate.
For associations who are currently negotiating loan agreements, I suggest including a clause clarifying that the late fees and interest incurred be different for willful nonpayment vs. nonpayment resulting from a state of emergency. That’s not an unreasonable request. Boards shouldn’t have to hope that their bank has a heart after the storm; it should be memorialized in their loan docs.
If your community has a question about how to deal with conditions post-Irma, please email me at email@example.com.