Florida ROC : Florida Mobile Home & RV Lawyer & Attorney : Scott Gordon : Lutz Bobo Telfair Eastman Gabel & Lee Law Firm : FL Condo & Homeowners Associations

The headline of Sunday's edition of the Sarasota Herald-Tribune reads "Condo Groups in Financial Pain".  The story accompanying that headline details the severe economic problems many condominium associations face as a result of the ongoing foreclosure crisis.   The article is well worth reading and contains examples of how several associations are attempting to survive a substantial decrease in their members and maintenance fees.

Our resident owned communities, for the most part, have not been severely impacted by the foreclosure crisis.  One of the reasons for this is that the ROCs we work with truly are resident owned--our ROC members customarily live in their homes for at least part of the year (or have one or more members of their family in the home).   In other words, very few of the homes in any of the ROCs we represent can  be characterized as "investment properties".

Nonetheless, I'd like to offer a few suggestions that may help ROC managers and board members better deal with problems arising from residents that fail to make timely payments of rents, maintenance fees or assessments:

1. Given the current economic climate, it's important to strongly encourage all residents to make payments when they are due.   I suggest a policy that should be developed and consistently and uniformly followed to send written notices to all delinquent members no later than 5 to 10 days after payment is due.    Many of the rights given to ROCs by the Florida Statutes to file legal actions or record liens for unpaid assessments and fees are triggered by providing written notice to the homeowner and the sooner this notice can be given the sooner the association can exercise its statutory rights.
2. The association should not be shy about getting its attorney involved early in the process to assist in recording liens and the legal actions that may be needed to protect the association's interests.  While there are certainly expenses involved in these legal remedies, it's quite often necessary to send a message to the members of the community that the ROC board and manager will do whatever it takes within the limits of the law to collect delinquent fees and rents owed to the community.,
3. When the association is named as a defendant in a foreclosure action filed against one of its members by an institutional lender, I always advise the association to answer that foreclosure complaint.  The association's filing of that answer ensures that the association will receive copies of all of the important pleadings that will be filed in that law suit, including the certificate of title that is issued to the person or company that purchases the home at the foreclosure sale.   It's very important that the association determine the new owner of the home as quickly as possible as Florida statutes quite often require that new owner to pay at least a portion of the unpaid maintenance fees or assessments to the association.   The association may have no way to quickly determine the name of the new owner if it has not filed its response to that foreclosure action.

Let's hope that 2010 brings us all heath, prosperity and happiness and that the "foreclosure crisis" is just a dim memory by this time next year.

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Can unit owners in resident-owned communities discover what the association is paying its employees, including the manager? 

We are asked this question frequently each year, especially when the association is in the process of preparing its annual budget.   Obviously, the association's employees would prefer that information about the compensation they are receiving be kept private and confidential and many board members and managers are uncomfortable disclosing this information to residents in the community.  Directors are concerned--quite often, with justification--that the residents in the community do not understand that a salary paid to a ROC employee in Ohio twenty years ago would not be a competitive salary in a community in Florida in 2009.

However, Florida's statutes governing condominium associations, cooperative associations, and mandatory homeowners associations make it clear that information about the compensation paid to an employee and the other benefits that an employee receives falls within the "official records" of the association.   Any association member is entitled to inspect and copy this information.

I have a few suggestions to help board members and managers maintain some amount of privacy for the association's employees without violating Florida statutes:

1. Florida's statutes require that an association member's request to inspect or copy official members be made in writing and that the association has a number of days to respond to that request.  This allows a manager confronted at the office by a unit owner demanding salary information to request that the unit owner submit his request in writing prior to allowing that unit owner access to that information.
2. The requirement that requests to inspect official records be submitted in writing allows the President or Chairperson to advise any member insisting upon disclosure of an employee's salary during a meeting of the board or membership that any unit owner  wishing to obtain this information is free to do so by submitting a written request as provided for by Florida's statutes.
3. It's also very helpful if the association's board of directors can assure its members that its employees' wages, salaries, and benefits are in line with those paid to employees in comparable communities in the area.  The board or manager can often obtain this information from its accountant or through networking with neighboring communities.   Local chapters of the Community Associations Institute and regional groups such as Mid-Florida ROC or SWFLROC  would provide an association's board members the opportunity to gather this information on an informal basis.

Finally, any member that does inspect or copy information about an employee's compensation and benefits should be gently but firmly reminded that any employee of the association deserves the courtesy of not having his or her salary broadcast throughout the community indiscriminately.   No unit owner would enjoy having his financial information freely discussed at the pool or in the clubhouse and any member that obtains an employee's salary information channels should respect that employee's privacy. 

In addition, ROC members living in communities where not all of the residents are members of the association (such as resident owned mobile home cooperatives where some home owners are not members of the cooperative) should keep in mind that a unit owner who divulges an employee's salary may in fact be providing that information to non-member homeowners who are not entitled to that information and who may try to use that information to damage the  association--for example, by challenging an increase in the annual rent to be paid by the non-member mobile home owners and citing the salary information that was intentionally or unintentionally disclosed to that non-member.

Clearly, every member of the association owes both the association's employees and all of the other residents in the community a high degree of discretion when that member obtains information about the compensation and benefits paid to association employees.

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We are now well into our "season" in Florida and most resident owned communities will be holding their annual meetings during the next few months.  It's thus a very good time to remind my blog readers that are members of condominium or cooperative associations of some of the important differences between ballots and proxies:

• In general, neither general proxies nor limited proxies can be used to elect the directors of a condominium or cooperative association.   The applicable provisions of the Florida Statutes that deal with the election of directors of condominium associations (F.S. Section 718.112(2)(d)) and cooperative associations (F.S. Section 719.106(1)(d)) specify that the members of the board of directors shall be elected by "written ballot or voting machine".   While the majority of voting interests in a condominium association with ten or fewer units or a cooperative association can provide in their association's bylaws for a different voting procedure that allows for elections to be conducted by limited or general proxy, I suspect that the bylaws governing most ROCs do not allow for this alternative procedure.
• F.S. Sections 718.112(2)(b) and 719.106(1)(b) provide that, unless the association's bylaws provide for a different percentage, the percentage of voting interests required to constitute a meeting of the members shall be a majority of the voting interests (in other words, 50 percent plus one) and that, unless otherwise provided in the association's governing documents or the applicable Chapter of the Florida Statutes (either 718 or 719), "decisions shall be made by owners of a majority of the voting interests represented at a meeting at which a quorum is present".    While limited proxies or general proxies can be used to establish a quorum as provided in Sections 718.112(2)(b) and 719.106(1)(b), ballots cannot be used for this purpose.   In other words, in order for a member to be counted as "present" in establishing a quorum at the annual meeting (or other membership meeting), that member must either be present in person at the meeting or have delivered his properly executed general or limited proxy to his proxy holder or the association prior to the meeting.
• Neither general proxies nor ballots can be used for votes to waive or reduce the statutory reserves otherwise required by statute or to waive the financial reporting requirements of F.S. Section 718.111(13) (for condominium associations) or F.S. Section 719.104(4)(b).  The only way a unit owner can validly vote on these matters is either by limited proxy or in person at the meeting where the voting occurs.
• The election of directors occurs at the annual meeting even If a quorum cannot be established at that meeting if at least twenty percent of the eligible voters have cast a ballot in that election, as provided in F.S. 718.112(2)(d)3 and F.S. 719.106(1)(d)1.

The provisions governing timeshares and mandatory homeowners associations are somewhat different and members of timeshare communities and subdivisions should consult with their association's attorney for additional information.

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Several ROCs have contacted me this summer about an increase in the number of residents that have not paid their monthly or quarterly rents or maintenance fees.   The effects of the economic crisis are now being felt in resident owned communities and there have even been several ROCs in Florida that have been forced to file for bankruptcy protection due in part to unpaid maintenance fees.

I often remind ROC board members that community associations are not banks.  ROCs that continually allow residents to pay rents, maintenance fees, or assessments after the due date function as a bank for those residents by giving those residents an interest free loan for the amount that's due--and each day that that loan remains unpaid puts greater economic pressure on the ROC and the residents that do pay on time.  

ROC managers know that the longer rent or maintenance fees remain unpaid, the greater the chance that the association will have to resort to legal action to attempt to collect the unpaid amounts--which will be growing with each missed payment.

I'd like to offer a few suggestions to help ROCs deal with this dilemma:

• Every ROC should have a policy for dealing with residents that fail to pay rents, maintenance fees or assessments on time.   Every resident should be made aware of the policy and board members should stress that the policy is necessary in order to allow the community to meet its financial obligations.
• This is not the time to "play favorites".  Unless there are extraordinary circumstances, all residents that are delinquent in payment of rent or maintenance fees should receive the same treatment.    For example, if the association's policy is to send a letter to any resident who is more than ten days late in making a payment, that letter should be sent to all residents that are ten days late, even those residents that have "always" paid in the past and "won't be a problem".
• ROCs should take immediate steps to put a resident on notice that he or she is delinquent in a payment.   Each of the statutes that provide remedies to ROCs when rents, maintenance fees, or assessments are not timely paid require certain written notices to be sent to the delinquent resident and the longer the association waits to send that first notice, the longer it will take for the ROC to be able to take the legal steps needed to help collect the unpaid amounts due.
• It's very important to find out as quickly as possible whether a lender has a secured interest in the home.   The ability of a community association to successfully recover amounts due and owing from a resident may be substantially impacted by the existence of a mortgage on or security interest in the lot, home or RV.   This determination should be made by the ROC manager or attorney prior to taking any legal action.  

Hopefully, we'll soon see better news on the economic front.    In any event, ROC managers and board members should continue to take the appropriate steps needed to protect the financial welfare of their communities.

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ROC board members and residents won't be happy with this answer, but I believe ROCs are violating Florida's gambling laws when their members conduct "50/50" drawings at community events.  Here's what leads me to this unpleasant conclusion--and, please remember, I'm only the messenger:

• F.S. Section 849.08 states that anyone who "plays or engages in any game at cards, keno, faro or other game of chance, at any place, by any device whatever, for money or other thing of value, shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083".
•  While a person may participate in certain "penny ante games" conducted under specific circumstances, "50-50" drawings are not included in the definition of a "penny ante game" in F.S. Section 849.085(2)(a).
• The "50-50 drawing" appears to be a "drawing by chance" or "drawing," defined in F.S. Section 849.0935(1)(a) as "an enterprise in which, from the entries submitted by the public to the organization conducting the drawing, one or more entries are selected by chance to win a prize."  The only organizations that can conduct these drawings are those that are exempt from federal income taxation under certain categories of section 501(c) of the Internal Revenue Code.   I can't see any ROC fitting within any of those categories (such as being a charitable or religious not-for-profit organization).
• Even if a condominium, cooperative, or homeowners association somehow manages to qualify for 501(c) status, the ROC still has to comply with all the applicable provisions of chapter 496 of the Florida Statutes, which governs solicitation of funds--again, a difficult, if not impossible, task.
• And, if by some miracle, the ROC has the appropriate 501(c) status and also manages to comply with the applicable provisions of chapter 496 of the Florida Statutes, the provisions of F.S. Section 849.0935(3) and (4)  include the additional requirement that any ticket used in connection with the drawing conspicuously discloses that no purchase or contribution is necessary to participate in the drawing (although the legislature has generously allowed organizations conducting these drawings to suggest a "minimum donation" in connection with the drawing).
• Finally,  F.S. Section 849.11 provides that anyone who "sets up, promotes, or plays at any game of chance by lot or with dice, card, numbers, hazards or any other gambling device whatever for, or for the disposal of money" shall ( just as in F.S. 849.08) be guilty of a second degree misdemeanor.

We've all attended events where "50/50" drawings have occurred.  Many of us have purchased "50/50" tickets and a few of us may have even held one of the winning tickets.   No one is hurt, several lucky attendees walk away with a few extra dollars in their pockets, and the organization conducting the drawing makes a little money.   While it certainly seems improbable that any official of Florida's law enforcement agencies would be concerned about any not-for-profit organization (church, charity, ROC or otherwise) conducting these "50/50" drawings, even if the "50/50" drawing technically violates the law, I found this article over a year ago while researching the issue for one of the ROCs we represent.  Apparently, at least in Pasco County, ROCs might want to think twice before conducting "50/50" drawings.

In any event, I'll certainly understand if I'm not asked to draw the winning tickets at "50/50" drawings at the next ROC meeting I attend. 

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I read two articles in last Sunday's edition of the Sarasota Herald-Tribune that should be of great interest to resident owned communities.

The first article focuses on the "false sense of security" that many Florida residents may have when the next hurricane approaches because they purchased "home protection products" even though the claims that these products make homes "hurricane resistant" or even "hurricane proof" may never have been tested or may in fact were found to be false.   It's a lengthy report but well worth reading if for no other reason than to remind managers and ROC board members of the dangers involved in recommending products or service providers.   Remember, we live in a world where potential liability lurks just around the corner.   No ROC wants to be sued because it recommended a product or service to one of its residents and that resident was injured or suffered damage to his property because the product or service recommended by the ROC board member or manager didn't perform as advertised.

The second article concerns the foreclosure crisis and reports that many lenders have now decided to delay taking title to properties that are in the process of being foreclosed.   There are a number of reasons for this, including those I've listed below:

• Lenders are now being required by judges to produce more records and file more pleadings and this adds to the time involved in the legal proceedings
• Lenders already have much more foreclosed real estate in their portfolios than they can sell at this time
• Every lender knows that once that lender takes title to a property at the foreclosure sale, that lender becomes responsible for both assessments and fees for the parcel and the maintenance and upkeep of the property                                           
• Lenders have no desire to pay any amounts for properties that are "non-performing" (that is, properties that are generating no income for the lender) and thus many of them have decided to leave these "non-performing" properties in "foreclosure limbo" rather than taking title to them.

This article simply confirms conversations I've had with representatives of several lenders within the past few weeks.

What this means for ROC's is quite simply that whatever rights ROC's have to collect unpaid assessments under Florida Statutes Sections 718.116(1)(b) (for condominiums), 719.108(1)     (for cooperatives) or 720.3085(2)(c) (for mandatory homeowners associations), those rights are triggered by the acquisition of title to the property--and if the lender chooses to delay the foreclosure proceedings, that "trigger date" will occur later (in some cases, much later) rather than sooner.  During this "limbo" period, ROC's will be forced to deal with properties that may not be properly maintained and are not providing any income to the community's coffers.  This is already creating substantial hardship for many communities thoughout the country. 

I certainly cannot tell you that relief is just around the corner from the many problems being created by the foreclosure crisis and the epidemic of untested, unproven, or defective "hurricane protection products" but I'll do my best to keep you posted when I read about any further developments.

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