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Florida Supreme Court’s Latest Construction Defect Decision: Triggering the Insurer’s Duty to Defend in the Pre-Suit Process

The issue of whether a chapter 558 notice serves as a “claim” under a commercial general liability (“CGL”) policy, such as the one issued by Crum & Forster Specialty Ins. Co. (“C&F”) in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. SC16-1420, 2017 WL 6379535 (Fla. Dec. 14, 2017), has finally been resolved and construction defect claimants can expect earlier participation from their carriers.

Prior to the Altman decision, homeowners and/or condominium associations were frustrated during the chapter 558 process after sending a notice of claim because insured construction parties could not get insurers to become involved in pre-suit negotiations. Such a result was antithetical to the purpose of chapter 558 – which was instituted specifically to streamline the construction defect claims process and encourage early alternative dispute resolution.

In Altman, the following question was presented to the Florida Supreme Court: “Is the notice and repair process set forth in chapter 558, Florida Statutes, a ‘suit’ within the meaning of the CGL policy issued by the insurer, C&F, to the general contractor, Altman Contractors, Inc. (“Altman”)?” The Florida Supreme Court recently answered in the affirmative and held that the notice process set forth in chapter 558 does indeed constitute a “suit” within the meaning of the CGL policy at issue – which in turn means that insurance carriers can no longer sit back following receipt of a chapter 558 notice and must instead take an active role earlier in the process.

‘Duty to Defend’

The Altman case stems from defects in the construction of Sapphire Condominium, a high-rise residential condominium in Broward County. C&F insured Altman for the Sapphire project through a policy that provided, in pertinent part, as follows: “[w]e will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.” Altman sought a declaratory judgment that C&F owed it a duty to defend and indemnify as part of the chapter 558 pre-suit process to resolve claims for construction defects, and that C&F breached the liability insurance policy by refusing to initially defend Altman in the suit against Sapphire. C&F denied that Sapphire’s chapter 558 notices invoked its duty to defend Altman under the policy because the notices did not constitute a “suit.” The insurance policy defined the term “suit” as follows:

“Suit” means a civil proceeding in which damages because of “bodily injury,” “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:

An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

The policy neither defined the term “civil proceeding” nor defined the term “alternative dispute resolution proceeding” within the context of the definition of the term “suit.” Notwithstanding, the Florida Supreme Court held that the chapter 558 process is included in the policy’s definition of “suit” as an “alternative dispute resolution proceeding.” [Emphasis added]

It is also noteworthy that since the Notice of Claim under chapter 558 is included in the policy’s definition of “suit” as an “alternative dispute resolution proceeding,” the insurer’s consent appears to be required in order to invoke its duty to defend the insured throughout the pre-suit process. In Altman, the Florida Supreme Court noted that “chapter 558 does not place any obligation on the insured to participate in the chapter 558 process. The chapter 558 framework has never been anything other than a voluntary dispute resolution mechanism on the part of the insured, despite its requirement that the claimant serve the insured with a notice before initiating a lawsuit.” Given that involvement in the chapter 558 pre-suit process is voluntary as opposed to mandatory on the part of the insurer, it remains to be seen whether insurance carriers will provide consent to participate in the process.

Nevertheless, upon receipt of a chapter 558 notice, it behooves contractors and subcontractors to tender the notice to their insurance carriers. It is in the insured-contractor or insured-subcontractor’s interest to encourage its insurance carrier to engage in the chapter 558 pre-suit process. Absent the insurance carrier’s involvement in the chapter 558 pre-suit process, the insured will be forced to incur its own costs and fees if the insured chooses to participate in the process without the consent of its insurance carrier. In the event that the insurance carrier fails to provide consent to engage in the chapter 558 pre-suit process and defend the insured, it may be in the insured-contractor or insured-subcontractor’s interest to litigate the matter because the insurance carrier’s duty to defend is then triggered and the insurance carrier will be forced to investigate the construction defect claims – shifting the financial burden from the insured-contractor or insured-subcontractor back onto the insurance carrier. In light of the foregoing scenario, it is more likely that the insurance carrier will be inclined to give consent to avoid the costs of litigation and to attempt to expeditiously settle the matter – but that is yet to be determined.

Settling Construction Defect Claims Now More Likely

Moreover, the insurance policy at issue in Altman is a standard commercial general liability policy and as such it is likely to have a profound impact on future chapter 558 construction defect litigation. Accordingly, defense carriers are more likely to be engaged in construction disputes, particularly during the pre-suit stage after a chapter 558 notice is received – or at least they should in light of this decision. As such, the chapter 558 process, unlike in many past years, is now likely to encourage the claimant and insured to attempt to settle construction defect claims prior to expending time and resources litigating those claims. Such a notion is consistent with the legislature’s aim in creating chapter 558 as an effective alternative dispute resolution mechanism, intended to curb construction defect litigation. Indeed, the Florida Supreme Court in Altman even stated, in dictum, that chapter 558 provides for a “statutorily required presuit process aimed to encourage the claimant and insured to settle claims for construction defects without resorting to litigation.”

In light of the foregoing, it is imperative that individual homeowners, homeowner associations and/or condominium associations, along with their experts, prepare detailed inspection reports that set forth the various construction defects affecting their property, what resulting damage is occurring as a result of those defects, the locations of the defects throughout the property, and determine compliance with the applicable building code, plans, and specifications. By virtue of more detailed reports in compliance with the requirements of chapter 558, it seemingly becomes more likely that construction defect disputes will result in settlements at an earlier stage – thereby saving the parties exorbitant amounts of money that otherwise would be expended in litigation.

David B. Haber is the founding partner of Miami-based Haber Slade, P.A. He is a commercial litigator with 30 years of experience who has handled multiple complex commercial disputes throughout Florida, including complex commercial litigation, construction, and condominium and homeowners’ association disputes. David can be reached at dhaber@dhaberlaw.com.

Frank Soto is a partner with the firm. He focuses on construction litigation. Frank can be reached at fsoto@dhaberlaw.com.

Brett Silverberg is a JD/MBA student at the University of Miami and a law clerk at Haber Slade. The firm is on the internet at www.haberslade.com.

Hurricane Irma: Tips for Navigating Your Way Through the Insurance Claim Process

Hurricane Irma has made a significant impact on many properties and people throughout Florida. The insurance claim process for condominium and homeowner associations can be complicated and frustrating. As soon as possible, associations should coordinate the claim process with their property management and legal counsel. These five issues are critical to that process:

Review and Document the Damage

You (the association and its management team) must promptly survey the properties for potential and/or actual damages that need to be reported and addressed. Document all actual and potential damage with photographs and video. This documentation should be accompanied by confirmation of the time, specific locations, and the person taking the photographs and video. Additionally, this documentation should be compared against the pre-storm documentation in order to prove that the damage did not exist prior to the storm. The “before” and “after” documentation is critical to fighting against insurers’ potential defenses. Associations should also gather any applicable maintenance records, vendor and repair records, and related documentation in order to establish the condition of the property pre-hurricane and the association’s regular maintenance practices and procedures. This helps prove that the damage caused by a hurricane (or similar insurable event) was not a “pre-existing condition” and/or a result of “lack of maintenance” at the property.

Associations should work with their legal counsel to review the Declaration and property boundaries in order to distinguish any reported unit owner property damage from the association’s property and common elements/limited common elements. These distinctions are important for both the insurance claim process and identifying the party responsible to repair.

Duties Under Your Insurance Policies

Make sure the association has updated copies of all applicable policies (part of the official records). Consult with your legal counsel in order to evaluate if the damage might apply under the flood policy, wind policy, and/or property policy. Depending on the type of damage, your claims may apply to multiple separate insurance policies. For each policy, create a checklist of the requirements for making a claim and the insurer’s deadlines that must be strictly complied with. Locate the section(s) in your policies titled “Duties of the Insured” a/k/a “Duties in the Event of Loss.” Add these items to your claim checklist and make sure to calendar all time deadlines.

After the storm event, associations must provide written notice to their insurance companies as soon as possible. Notice merely to your insurance agent is not notice to the insurance company. No association wants an otherwise legitimate claim to ultimately be denied because it failed to timely notify the insurance companies in writing. Your claim checklist for each policy should include the name, address information, and policy specific requirements for providing written notice of the claim.

Additionally, notify the owners/residents to promptly document and file their own individual insurance claims for their own insured property (finishes, property, and other items within the unit boundaries).

Communications with Adjusters and Insurance Companies

All too often, an association’s property management and/or directors erroneously believe the adjuster from the insurance company is on the association’s team in this process. Wrong! The adjuster sent by the insurance company does not work for you and is not a neutral party. The adjuster is paid by the insurance company and is often a third party contractor. Keep in mind the adjuster is primarily attempting to assist the insurance company to limit the loss/exposure of the company.

All-important communications with the adjuster and insurance companies should be timely documented in writing. Internal emails and other communications between the board of directors, property management, and the association’s legal counsel should not be inadvertently shared with the adjuster and/or insurance company. Consult with your legal counsel before responding to information requests and have your legal counsel instruct the adjuster and insurance companies to direct all communications about the claim to legal counsel.

Interim Repairs

You may need to make some interim repairs at the property before your claims are fully resolved. After the damage to the property has been evaluated and documented, it is important for associations to take the necessary steps to mitigate further damages and losses – – without prejudicing your rights under the applicable insurance policies. Make sure to provide written notice to your insurers regarding: (i) your proposed interim repairs and mitigation steps; (ii) the estimated costs; and (iii) confirmation that the insurer consents to you proceeding with the interim repairs even though your claim is still under review. Document the interim repairs with photographs, videos, estimates/bids, purchase order, invoices, as well as proof of payments. Emergency mitigation should always be performed as soon as possible (i.e., covering open windows and/or roof openings).

For non-emergency repairs/remediation, you should solicit at least three bids/estimates for each scope of work (unless you cannot find three bidders or in an emergency). The Board is not required to select the lowest bid – – and should be weary of bids that are unusually low compared to the others. For larger repair projects, it is important to coordinate the bid and contract requirements with your legal counsel before sending it to prospective bidders. Including the association’s contract requirements and standard clauses in the request for bids will help reduce contract negotiation and preparation time.

Additional Factors

There are related issues that are also very important to consider, such as: (i) does your association have a loan with a lender and thus have borrower specific duties under the loan documents? Associations should carefully review their loan documents with legal counsel in order to ensure compliance with the lender specific issues; and (ii) many management companies include a provision in their standard management contract that the association is required to pay the management company additional compensation in the event of significant repair projects after insurable events (a/k/a Hurricane Irma). This is an important factor for the Board to consider when preparing repair budget(s).

David T. Podein is a partner at the law firm of Haber Slade. He concentrates his practice in the areas of real estate leasing, financing, and acquisitions/closings, real estate development, condominium and community association law, and construction law. David can be reached at dpodein@dhaberlaw.com. The firm is located on the internet at www.haberslade.com.

Unit Owners, Beware: The Developer May Have Stacked the Board Against You

Condominium and HOA Board Members May be Neglecting the Duties You are Owed

Are you concerned that the developer of your condominium did not deliver on the promises made to you when you purchased your condominium unit? Are you concerned with the construction of the condominium in which you live? For most individuals, the purchase of a condominium unit can be their most important investment. However, many of the decisions impacting this investment are not up to the owner of the unit, but rather, are left up to a board of directors controlling the association.

At a specified time, the developer of a condominium is required to relinquish control of the association’s board of directors in favor of the unit owners. The turnover of an association from developer to the unit owners presents the first opportunity for the association’s board to hire a lawyer, an accountant, and an engineer to perform important and time-sensitive inspections of the condominium. These inspections will identify construction defects and other concerns that may exist. As such, it should not be surprising that a developer would want a “friendly” association board of directors following turnover. But imagine the havoc an unscrupulous developer could inflict if the association’s newly elected board members—or the attorney and engineer working for the unit owners—have financial ties to the developer.

A recent Miami-Dade Grand Jury report found that there was extensive fraud, mismanagement, stacking of boards, and conflicts of interest among condominium association boards.[1] Such misconduct is not limited to Miami-Dade, however. Perhaps surprisingly, one of the largest public corruption cases set in the fast-paced, scheming neon desert notoriously dubbed “Sin City” did not involve the usual Las Vegas suspects, but rather a contractor, a lawyer, and a stacked board of condominium directors. In 2015, Leon Benzer, a construction company boss, was sentenced to 15 ½ years in federal prison for orchestrating a scheme to take control of association boards for the purpose of channeling construction defect repairs to Benzer’s company. Benzer’s scheme involved a network of recruited purchasers and real estate agents who would get elected to association boards, hire Benzer’s attorney, and award lucrative contracts to Benzer’s construction company. Through these unethical practices, these individuals violated the duties owed to the association and its unit owners.

Condominium unit owners who serve on the board of directors are considered shareholders of the association, and act in a fiduciary relationship to each owner. In such relationships, the law demands a higher than ordinary degree of care from each director and officer, with Florida law specifically demanding directors to discharge their duties in good faith. Simply put, directors should act to protect the best interests of the association and its unit owners, rather than their personal interests or those of affiliated third parties. The actions of the board members in Benzer’s scheme were in complete disregard of the unit owners’ rights, as they participated in rigging elections and seeking only personal gain. In order to avoid a Benzer-type scheme, it is critical for unit owners to exercise due diligence in selecting truly independent individuals to become board members to represent the best interests of all the unit owners at the time control of the association is transferred from the developer. Since Florida law permits condominium association boards to settle claims concerning monies owed from the developer and matters of common interest to the owners, including construction defect claims, it is even more vital to ensure that an association’s board, their attorney, and engineer are not being led by ill-intended individuals to unscrupulously settle claims for pennies of their real worth, accept cosmetic repairs that do not fully address the underlying defective condition, and waive association claims for latent defects.

In order to ensure that meritorious claims of unit owners are adequately protected, unit owners must get involved and confirm that independent board candidates without financial ties to the developer or contractor are seeking election to the association’s board. Additionally, steps should be taken to confirm that the association’s officers and directors hire independent, knowledgeable attorneys and engineering firms, not attorneys and engineers affiliated with the developer or contractor. Unit owners should be cautious when dealing with an attorney that was selected, hired, and paid by the developer-controlled board prior to the unit owners taking control of the association. Unit owners must ask critical questions of management, those seeking election to the board, and the attorneys and engineers being interviewed to represent the association, as to their involvement or affiliation with the developer or contractor that built the condominium. Protect your investment, and avoid a Benzer “stacked board.”

For further information regarding the turnover process, self-dealing, conflicts of interest, and the duties of your board of directors, please submit your questions on our website and get the information you need to make sure you are safeguarding your investment.

Nicholas Siegfried is a partner with the South Florida law firm of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A. who has focused on community association and construction law since 2006. He is based at the firm’s office in Coral Gables, and the firm also maintains offices in Broward and Palm Beach counties, representing more than 800 associations throughout Florida. He may be reached at nsiegfried@srhl-law.com and at (305) 442-3334.

[1] Final Report of the Miami-Dade County Grand Jury Spring Term 2016, Addressing Condo Owners’ Pleas for Help: Recommendations for Legislative Action, at 1-31(Fla. Cir. Ct. Feb. 6, 2017). A copy of such grand jury report may be found at: http://www.miamisao.com/wp-content/uploads/2017/02/Grand-Jury-Report-Final.pdf.

Florida Appellate Court Weighs in on Short-term Rentals in Private Residential Communities

The topic of Airbnb and similar short-term rental sites is on most boards’ minds these days as more and more owners look to monetize their condominium and cooperative units as well as their single-family homes. Recently, the First District Court of Appeal issued a ruling in the case of Santa Monica Beach P.O.A. v. Acord, Case No. 1D16-4782, (Fla. 1^st DCA, April 28, 2017), which held that residential use restrictions in a community’s covenants were not sufficient to curb short-term rental activity. The homeowners, Mr. and Mrs. Acord, listed their homes on the VRBO website, obtained transient rental licenses in a corporate name, and collected and remitted state sales and local bed taxes. The association asserted that such activity violated the Santa Monica Beach subdivision restrictive covenants which stated:

Said land shall be used only for residential purposes, and not more than one detached single-family dwelling house and the usual outhouses thereof, such as garage, servants’ house, and the like, shall be allowed to occupy any residential lot as platted at any one time; nor shall any building on said land be used as a hospital, tenement house, sanitarium, charitable institution, or for business or manufacturing purposes nor as a dance hall or other place of public assemblage

The trial court granted a motion to dismiss with prejudice after finding that the short-term rental use was residential rather than commercial.

The First District Court of Appeal was asked to determine whether short-term vacation rentals violate restrictive covenants requiring property to be used only for residential purposes and prohibiting its use for business purposes. The Court focused on the actual use by the short-term renters (eating, sleeping, etc.) and not the hotel-like duration of the rental. The Court cited other case law holding that a rental, even a rental for profit, does not transform the use of a dwelling from residential to either business or commercial. After all, even short-term renters are using the premises for typically residential purposes and not to run a business, and the fact that the owners of these units are deriving revenue from the rentals does not change the use of the premises from residential to commercial. Ultimately, the Appellate Court simply could not rely upon the “no business use” restriction in the restrictive covenants to prohibit short-term rental activity. Had the association attempted to rely on leasing restriction rather than a “no business use” restriction, would things have turned out differently?

Perhaps the most telling and most instructive comment from the court in the Santa Monica Beach case was the observation that the association had no specific restriction on short-term rentals. Many communities have restrictions on leasing in their governing documents, which can include minimum and maximum lease terms, a limit on the number of times per year an owner can rent, to an overall cap on the number of properties that can be leased at any one time. Enforcement of short-term rental restrictions against this kind of transient rental can be very difficult because the tenant comes and goes before there is any opportunity for enforcement action rendering the violation moot. However, an action or activity, like repeated short-term rentals, that is capable of repetition but evading review would be an exception to the mootness doctrine. In the Santa Monica Beach case, if the association had short-term rental restrictions in its governing documents, an owner’s pattern of renting out the dwelling in violation of the minimum lease terms could have been used to seek injunctive relief against future violations. The goal for most associations, however, is to deter the activity rather than having to overcome hurdles in court.

Regulate or Prohibit?

In some communities, it might make sense not to prohibit short-term rental activity, but to regulate it and perhaps even monetize it to defray the association’s operating expenses. Fees can be charged for registration, parking, and the use of recreational amenities. It might also make sense for the association to operate a mandatory rental pool in order to control all aspects of rental activity from booking to arrival and departure.

For those communities who do wish to restrict this kind of activity, the starting point is to ensure that their governing documents contain a clear, unambiguous restriction which defines engaging in Airbnb activity as a violation of the contract between the association and its members. From there, the association can proceed to impose fines, suspend use rights, put the short-term rental websites on notice of the ineligibility of properties in the community to offer these services, and/or pursue arbitration or injunctive relief.

Local Government Likely Cannot Help Your Association in This Battle

There is a logical argument to be made that local governments have a dog in this fight and should be regulating and/or restricting short-term rental activity. Airbnb and similar companies understand that their business model can be greatly impacted by local ordinances, so they have been proactive in seeking out legislators who will ensure such actions are not permissible. In the 2017 Florida Legislative Session, two vacation rental bills were introduced that primarily impact local governments. The goal from Airbnb’s standpoint is to preempt local governments from regulating vacation rentals. Given Airbnb’s success so far in protecting its business model by putting the brakes on those who might oppose them, it only makes sense that private residential covenants might come up on their radar in the near future. Associations, particularly those in tourist-heavy locations, would be well-advised to review and amend their documents now to address this issue as waiting too long might result in an inability to impose meaningful restrictions.

The takeaway from this first appellate case regarding the inevitable tug of war between the desire of some association members to monetize their properties and the association’s desire to protect the residential nature of the community is that in order to curb or prevent Airbnb activity in a private residential community, the governing documents must tackle the problem head-on. No beating around the bush or relying on existing restrictions which were drafted years before the Airbnb business model came into existence.

Donna DiMaggio Berger is a shareholder at the community association law firm of Becker & Poliakoff and has represented all types of shared ownership communities throughout Florida. Berger is a member of the College of Community Association Lawyers (CCAL), a prestigious national organization which acknowledges community association attorneys who have distinguished themselves through contributions to the evolution or practice of community association law and who have committed themselves to high standards of professional and ethical conduct in the practice of community association law. Berger can be reached at (954) 364-6031 or via e-mail at dberger@bplegal.com.

Insurance Appraisals and Coverage for Condominiums

Property insurance premiums are continuing to rise, and now is a good time for condominium boards and property managers to review their understanding of insurance coverage requirements and the insurance appraisals that are used to establish coverage limits. Per Florida Statute 718, The Condominium Act, the association “…shall use its best efforts to obtain and maintain adequate property insurance to protect the association, the association property, the common elements, and the condominium property….” Additionally, the statute requires that the insurable replacement cost be “determined by an independent insurance appraisal or update of a prior appraisal.”

Hazard Insurance

Every hazard insurance policy issued or renewed after January 1, 2009, must provide primary coverage for “All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications.”

Further, the statute defines building components that are not included in the condominium hazard insurance. The Statute specifically states:

The coverage must exclude all personal property within the unit or limited common elements, and floor, wall and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit.

Items excluded from the condominium association’s property insurance are the responsibility of the individual unit owners to insure. Thus, it is important for condominium unit owners to have a good understanding of the association’s insurance policies and their individual unit policy to avoid gaps or overlap in coverage. Certainly, a key goal for the Condominium Act is to clarify coverage responsibility and “to ensure consistency in the provision of insurance coverage to condominiums and their unit owners.” Additionally, standard underwriting guidelines for hazard insurance values exclude foundations and piping underground from coverage.

Flood Insurance

While the Florida statutes specify coverage parameters for hazard insurance, they are largely silent on the issue of flood insurance. Coverage for flood insurance is defined by the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA). FEMA coverage is based on Replacement Cost Value (RCV) of the complete residential condominium building without the exclusions mentioned previously for hazard insurance. RCV is defined as the full current cost to construct replacement buildings (or portions thereof based on the extent of flood damage) having equal utility as the damaged property using current construction methods and materials. This coverage includes the interiors as they were originally built, and does not cover upgrades which were added by the unit owners. Federal flood insurance, underwritten by the U.S. Government, is available for residential condominium buildings up to a maximum RCV of $250,000 per unit (calculated by multiplying the total number of units in the building by $250,000). Additional flood coverage over this limit is obtained on the open insurance market.

Non-residential association buildings (defined as buildings with less than 75 percent of structure floor space for residential use) having two or more outside rigid walls and a fully-secured roof can obtain FEMA flood insurance up to a maximum actual cash value (ACV) of $500,000 per building. ACV is defined as replacement cost minus physical depreciation value. Clubhouses and pool houses would be typical examples of association non-residential buildings. Note that any amenities not meeting the rigid wall and roof requirement such as carports, walkways, pools, tennis courts, fences, etc. would not be covered for flood insurance.

The difference between hazard insurance and flood insurance values can create a great deal of confusion among unit owners and condominium boards. Typically, hazard values are typically around 65–70 percent of flood insurance values.

Insurance Appraisals

For an association property to be properly insured, an accurate, unbiased appraisal of the replacement costs must be obtained. Given the complexities of the appraisal process in determining current building costs and differentiating hazard and flood values, it is strongly recommended that condominium associations seek out an appraisal firm that has expertise in this area. A firm that has Florida state-certified and licensed appraisers assures a high level of competence. Licensed appraisers are accountable to the Florida Department of Business and Professional Regulation and the Florida Appraisal Board. Cost estimators who are not state-licensed appraisers typically have no government oversight or accountability for the accuracy of their reports.

The insurance appraisal process involves a physical inspection of the buildings and amenities being insured. Photographs are taken for reference as required by the insurance carriers. When available, “as-built” architectural building plans are utilized by the appraiser to determine square footages and building details that are not observable from the on-site inspection. When plans are not available, measurements are taken and drawings are made on-site. From these, computer-aided drawings are created to accurately determine the square footage for all building areas.

Current construction costs are determined using professional building cost systems based on building type, class, size, design, quality and many other factors including local construction material and labor costs. Finally, an appraisal report is developed in the format required by the insurance carrier to properly underwrite the association hazard and flood policies.

Accurate Appraisals Are Critical

The risks associated with poorly developed and inaccurate insurance appraisals can be high. No association wants to find itself in a position of being over or under-insured. If the appraisal is low, the risk of co-insurance penalties and insufficient insurance proceeds to replace a total loss are very real. Conversely, if appraised value is high, the insurance premium will be higher than necessary and a waste of association budget dollars.

Rick Logan and Bob Townsend are both Florida State-Certified General Real Estate Appraisers and have more than 50 years combined appraisal experience. Their firm, Townsend Appraisals, specializes in developing insurance appraisals for condominium associations and commercial building owners to establish coverage limits for hazard and flood policies. Their office is in Naples, Florida, and they service all Southwest Florida from Everglades City to Tampa. All staff appraisers are state-certified and licensed. For more information, visit www.townsendappraisalsinc.com.

How Can a Community Reduce Wait Times at the Gate?

Frequently Asked Questions: How Can a Community Reduce Wait Times at the Gate?

It’s a question and issue that almost everyone faces. Whether you are the property manager, a resident living in a gated community, a vendor, or a visitor who uses a community’s gate often—it is easy to relate to the frustrations that come with long wait times at a community entrance. Many people refer to this as stacking, or the buildup of vehicles at an entrance. While it is unlikely that this issue will be resolved at all times, with technological advancements, there are methods that can greatly decrease the chances of stacking.

Before a community discusses the options to alleviate wait times at the entrance, it’s important to determine the cause, and there can be several explanations. First, a telephone entry system is a common culprit for stacking. Not only are these systems typically unreliable and antiquated, but the codes can be misused or time consuming as visitors search through a long list of names to find the resident he or she would like to see. Just one driver dealing with this can create a long back-up of vehicles at a community, especially during busy times of the day.

There are other instances with gate guards that can cause stacking at communities. If the guard does not have an updated system that allows him or her to quickly verify visitors and complete transactions, it is likely that stacking will frequently occur. While a revised method for verification would help expedite transactions, there are also cases where the drivers trying to enter a community create a backup. Unfortunately, this type of situation is difficult to control. The visitor may not be approved to enter or cannot reach the resident he or she is trying to visit. This type of circumstance makes it even more important to have a quick transaction process that can speed up the verification of other guests after a backup.

Once a community determines the main cause or causes of stacking, then the options for expediting the process can be examined. The most efficient method to decrease stacking at a community is to incorporate a form of automation at the entrance. The two main types of automation are automatic license plate recognition and automatic driver’s license recognition. Both allow permanent and pre-registered visitors to quickly gain access to a community after immediate verification.

Automatic license plate recognition verifies visitors at a community when a license plate is associated with a registered visitor. When an image of the license plate is captured, the plate is cross-referenced with the database of approved vehicles, and the gate opens for permitted guests. Not only does this expedite wait times, but it easily verifies repeat visitors with a high capture of vehicle information to keep the community secure. If a vehicle’s license plate is not recognized, the driver can speak with a virtual guard or gate guard, depending on what the community uses.

Automatic driver’s license recognition easily recognizes verified guests by capturing an image of the name on the driver’s state-issued identification. Typically, drivers insert their license into an ATM-like scanner that will verify the name and automatically open the gate for permitted visitors. If the driver’s name is not recognized, the driver can speak with a virtual guard or gate guard, similar to the process with automatic license plate recognition.

Both types of automated systems also increase the security of a community. With simple tracking and recording of all visiting drivers entering, the community has the capability to recall identification information of guests should a problem ever occur at the gate or in the neighborhood. In addition, a virtual guard kiosk can record the audio of a transaction, and more cameras can capture angles of an entrance for added security.

While every community has different needs and preferences, both automated options are effective and efficient for reducing wait times at a gate. Allowing permanent and pre-registered visitors to have automatic entry expedites the entire transaction process and is easier for the guests, residents, and property managers at the community. Plus, the automation systems keep the entrances secure with a high capture of identification and/or vehicle information. If you have security questions or concerns, please e-mail ask@enverasystems.com.

Brie Peterson is the Business Development Consultant for Envera Systems. She works closely with the sales and marketing departments to provide best-in-class service to the communities that Envera works with. Envera Systems specializes in security technology systems with remote guards to replace or enhance guards at communities. Contact info: (855) 380-1274 or www.EnveraSystems.com.

Medications for Community Association Corruption

The 2017 Spring Legislative Session: Medications for Community Association Corruption (May Have Serious Side Effects)

Consumer protection for community association members from board or management corruption is the most dominant theme of the pending legislative session. The following is an overview of proposed legislation as of March 29, 2017.

Liability for Directors, Officers, and Management Companies (SB 1682, HB 1237, SB 1258, and HB 1001)

This proposed legislation was prompted by a Grand Jury Report issued after Miami-Dade County State Attorney Katherine Fernandez Rundle investigated complaints of alleged widespread corruption and fraud in condominiums. The controversial Report, released on February 6, 2017, was in response to a multitude of owner complaints of fraud and disenfranchisement. The Report diagnosed the following issues: (1) inaccessible records; (2) association management issues; (3) director conflicts of interests; (4) ineffective enforcement by the Department of Business and Professional Regulation (“DBPR”) Division of Condominiums, Time Shares, and Mobile Homes (the “Division”); and, (5) fraud in Board Elections. Consequently, the Report seeks legislative changes to curtail these issues.

The Report argues that the DBPR is ill-equipped to prevent the recurring problems afflicting associations. Consequently, it seeks a more active role for an already over-worked judiciary and criminal justice system. The Report proposed introducing financial and/or criminal liability for wrongdoing directors, officers, and/or management companies. The resulting outcry from industry professionals and associations includes commentary that the Report is somewhat one-sided, does not give due consideration to DBPR funding issues that impact its enforcement abilities, and makes overly harsh recommendations attacking volunteer directors, which will increase operating costs and dissuade board service. The Report counters that those individuals you want running boards would never engage in criminalized conduct.

SB 1682 and HB 1237 attempt to address the concerns raised by the Report. The main legislative proposals are as follows:

Directors can’t serve four (4) consecutive two (2) year terms absent a two-thirds (2/3rds) membership vote approving lengthier service;

Expediting recall procedures;

Prohibiting dual legal representation of an association and its management company;

Prohibiting directors and managers from acquiring foreclosed real estate at a foreclosure sale or through deed in lieu and prohibiting managers from acquiring more than 50 percent of the units or any unit subject to an association lien;

Introducing conflict of interest disclosure requirements and preventing associations from dealing with companies owned, operated, or associated with directors or any person with a financial relationship to them;

Criminalizing knowing and willful prevention of access to the association’s records and defacement or failure to maintain association accounting records by directors or management companies;

Criminalizing knowing and willful fraudulent voting activities in elections;

Modifying voting suspension rights for delinquencies by requiring at least $1,000 to be owed and thirty days of notice;

Requiring the digital posting of certain records for associations with more than 500 units;

Allowing for private sector Division Arbitrators;

Bids for materials, equipment, or services are added to the list of records; and,

Providing official record access to tenants.

The criminal penalties range from misdemeanors (first to third degree) for repeat failures to provide association records upon authorized request to third degree felonies for election fraud. Regarding conflicts of interest, the proposed legislation overlooks protections already in place for interested director transactions under a theory that permitting any interested director transactions creates a moral hazard—a slippery slope towards corruption.

SB 1258 and HB 1001 (on no committee agendas at present) proposed to establish personal financial liability for directors or officers where the board or the Division determines that the director or officer knowingly violated governing documents or Chapter 718. The director or officer would be personally liable for increasing civil penalties based on the number of offenses. SB 1258 and HB 1001 emphasize deterrents and a Division role, but threaten liability and abuse through board overreach.

In effect, the bills seek to prevent directors from delaying or undermining rights to transparency and self-determination, which protect against abuse. While the bills reflect a positive intention by the legislature to curb abuses, critics assert that these legislative proposals go too far.

Protections for Homeowners’ Association Members and Buyers (HB 295)

In the case of HOAs, HB 295 (also not on any agenda) provides that a member denied access to records would be entitled to minimum damages of $500 per day for up to 30 days—a significant increase. This amount was troublesome considering that some members use records requests as a tool to harass. If a community association manager is responsible, the member could maintain a cause of action against the manager; however, manager indemnification of associations is excluded.

The bill eliminates liens for fines in excess of $1,000, modifies triggers for HOA turnover from the developer, and requires sellers to provide governing documents and budgets to prospective buyers at least seven days before closing—coupled with termination rights within three days after receipt, and also would create a cause of action against developers for enumerated grounds.

Lastly, HB 295 would expand the jurisdiction of the DBPR over homeowners’ associations, including the Division arbitration program’s applicability to HOAs, would require DBPR training programs, and would grant the DBPR the authority to enforce compliance with Chapter 720. Given the Report’s perceived funding and enforcement issues with the DBPR, it was interesting that proposed legislation seeks to expand its role while other legislation attempts to increase the role of the criminal justice system in lieu of more robust DBPR enforcement. SB 1650 also would expand Division arbitration for HOAs, bypassing presuit mediation.

Regarding Marketable Record Title Act (“MRTA”) Issues (SB 1046 and HB 735)

SB 1046 and HB 735 require mandatory consideration of MRTA preservation issues, mandatory periodic public records disclosures, and provides for a new MRTA preservation procedure.

Amendments and Estate Protections (SB 1186 and SB 950)

SB 1186 intends to change procedures for HOA amendments and incorporate a restriction on the applicability of rental restriction amendments to pre-existing owners who do not consent. SB 950would have protected the estate of a deceased owner from fines, interest, and late fees for certain specified periods.

Regarding Condominium Termination (SB 1520 and HB 7055)

SB 1520 and HB 7055 both enable all homestead owners who reject a plan to receive their original purchase price for their terminated condominium, not just direct purchasers from a developer, and adopt similar changes to the approval / rejection termination thresholds, making termination more difficult.

Estoppel Letters (SB 398 and HB 483)

Both would cap and categorize estoppel letter fees under varying circumstances and require a response to a request for an estoppel certificate within ten business days. They provide for certain mandatory estoppel disclosures, as well as publication of the name and contact information of a designated recipient for requests.

Operational Issues, Including Financial Reporting, Fire Safety Retrofitting, Among Others (SB 744, HB 653, and HB 6027)

Each would require associations with less than 50 units to submit more comprehensive annual financial reports and would eliminate language preventing condominium associations from reducing their financial reporting requirements for more than three consecutive years.

SB 744 and HB 653 have other wide-ranging changes. For condominiums: (1) includes electronic voting records in association official records; (2) clarifies that associations under 75 feet high are exempt from fire sprinkler/life safety retrofitting; (3) extends deadlines to opt out or perform fire sprinkler/life safety retrofitting to December 31, 2018; and, (4) allows meeting notice posting on websites. For HOAs specifically: (1) directors may communicate but not vote on matters via e-mail; (2) overhauls mandatory reserve requirements and voting procedures; (3) allows a developer to waive reserves for an association’s first two fiscal years but prevents waiver thereafter without a member vote; (4) adds language preventing accord and satisfaction in statutorily compliant allocation of payments; and, (5) prohibits write-in nominations where there is no election, unless the by-laws requires them.

Conclusion

Whether ultimately enacted or not, it is clear that the legislature is attempting to curb association abuses of power, create stronger penalties and disincentives to wrongful conduct, and in several cases, to address concerns in the Grand Jury Report. Whether the legislature will fund the criminal justice system or the DBPR to address these abuses is an entirely different story. Without proper funding for enforcement, the legislature may simply be doling out a placebo.

David B. Haber is the founding partner with Haber Slade P.A. Haber’s practice includes community association law, real estate, construction, and commercial litigation, and aviation law. His e-mail is dhaber@dhaberlaw.com. Jonathan S. Goldstein is a senior associate attorney with Haber Slade P.A. Goldstein’s practice includes community association law, real estate, construction, and commercial litigation. His e-mail is jgoldstein@dhaberlaw.com. Alexander G. Leon is an associate attorney with Haber Slade P.A. Leon’s practice includes community association law, real estate, construction, and commercial litigation. His e-mail is aleon@dhaberlaw.com. This article is for informational purposes and should not be taken as legal advice.

Improper Hard Flooring

Improper Hard Flooring Not Protected by Selective Enforcement or Waiver of Defenses

It is not uncommon for an association to have flooring restrictions to protect downstairs unit owners from excessive noise. Can a unit owner claim selective enforcement if an association only seeks to enforce the rules against the upstairs unit owners? What if the association’s president says it is “ok?” Maybe the flooring will still have to be ripped up!

In a case hot off the presses, a Florida appellate court just concluded that an association did not selectively enforce or waive its flooring restriction. In Laguna Tropical v. Barnave, No. 3D16-1531 (Fla. 3rd DCA, January 25, 2017), a unit owner replaced her carpeting with laminate flooring. The following year, the resident below the owners’ second story unit complained about noise and asked the association to enforce the Declaration, which prohibited an owner from altering, modifying, or replacing the interior of a unit without the consent of the association and to enforce a rule providing that only carpeting shall be installed in the units.

Following an unsuccessful arbitration effort, the association filed suit against the owner to enforce the flooring restrictions. The trial court agreed with the owner’s defense of selective enforcement and granted judgment for the owner.

The Florida appellate court reversed the judgment and returned the case to the trial court for enforcement of the Declaration against the owner. The court noted that of the condominium’s 94 units, 11 were only upstairs units, 11 were downstairs units, and the remaining 72 units included first and second floor space within the same unit. The configuration was important to the selective enforcement defense because owners of two story units who installed hard flooring upstairs would not have complained about their own flooring.

Although the owner argued that the association only enforced the flooring restriction against 11 of the units, the appellate court noted that these 11 units were exclusively upstairs units. There was no evidence that occupants of the 72 upstairs-downstairs units ever complained to the association about the noise. There were only a “handful” of noise complaints by downstairs-only owners that led to successful enforcement by the association, which included either replacing the tile or wood flooring. Additionally, the court commented that there was no evidence that the association refused to enforce a noise complaint regarding a downstairs-only unit.

“In the present case, the prohibition on floor coverings other than padded carpet is plainly intended to avoid noise complaints,” the court stated. The court concluded that no selective enforcement was proven since there were no complaints regarding any units except for units like the owner’s second-floor unit.

In a second issue, the owner alleged that the association’s president e-mailed that it was ok to install the flooring. The court determined that the owner could not reasonably rely on the president’s e-mails. Why? Because the Declaration required alterations to be approved by the board of directors, no one officer could provide the approval.

This decision should help Florida community associations. To begin with, the case reinforces that owners have to prove their defenses. Second, it appears that for restrictions that protect neighboring owners from nuisances such as noise, if there is no complaint, then the association may not have to enforce the rule. Third, at least under these facts, there is a limit to owner reliance on unauthorized e-mails. However, it would appear that the selective enforcement holding is limited to those rules that protect others and may not apply to general restrictions that impact the community at large such as those rules regarding uniform appearance.

Death Liability in Suit Despite Employer’s Workers’ Compensation Coverage

Taking inconsistent positions or even making unclear statements after a claim was filed, may curtail a Florida association’s defense in a lawsuit. The facts in Gil v. Tenet Healthsystem North Shore, Inc., 41 Fla. L. Weekly D 2567 (Fla. 4th DCA, November 2016) arose in a hospital but could just have easily occurred in a Florida community association.

Rafael Gil apparently was exposed to hazardous materials while working as a carpenter for North Shore Medical Center. After Gil died, his wife filed a claim with the hospital for workers’ compensation benefits. The hospital denied her claim on the basis that Mr. Gil’s employment was not the “major contributing cause for his death.”

Mr. Gil’s wife then filed a wrongful death action against his employer, the hospital. The hospital maintained that no lawsuit could be filed because Mr. Gil’s wife’s exclusive remedy was through the workers’ compensation process. The lower court agreed and granted summary judgment for the hospital.

The Florida appellate court disagreed, reversing the decision of the trial court. The appellate court explained that if an employer claims that an employee is not entitled to workers’ compensation benefits because “the injury did not occur in the course and scope of employment, or that there was no employment relationship” the employer cannot claim immunity on the grounds that “the worker’s exclusive remedy was workers’ compensation.” The issue in this case was whether the hospital took inconsistent positions.

The court pointed out that the language used by the hospital in its notice to Mr. Gil’s wife regarding the denial of benefits was ambiguous. Therefore, there was a factual issue of whether the hospital was prevented from claiming immunity from a lawsuit.

“In the present case, if the hospital merely intended to allege the medical causation defense, it did not do so clearly,” the court explained. “Here, the notice of denial did not indicate there was a compensable injury, and instead generally provided that the entire claim [was] denied because claimant’s ‘employment’ was not the major contributing cause for his death”

The lesson to be learned is that in trying to avoid responsibility for insurance claims in the short run may not work in the long run. As soon as an association receives a claim, you should contact your association’s attorney and if there is an employee claim of injury then normally also contact your worker’s compensation carrier. This case also serves to remind associations to take care drafting contracts to properly address insurance requirements, not just assuming coverage exists “because it should.”

Get Ready, Get Set, Do Not Go!

The Florida Legislature Readies for 2017

It is time to gird for battle! Legislators and lobbyists are flooding into Tallahassee. The state is in a state!

At this time of year Florida community associations and their members warily watch for new legislative initiatives. It is too early to anticipate what, if any proposals that affect community associations will become law. Nevertheless, in advance of the March call to order for the Florida legislative session, legislative committees are scheduling and holding hearings.

Issues of all types are being pursued—HOA regulation, confirming condominium sprinkler retrofit requirements and providing for some extensions, and setting requirements for estoppel letters.

Bills that could affect Florida community associations if they become law include the following (“HB” means House Bill; “SB” means Senate Bill):

Homeowners Associations. HB135. For communities containing 7,500 or more parcels, election procedures are sought to be changed.

Homeowners Associations. HB137 would require disputes concerning many homeowners’ association issues to be sent to the Division of Condominiums pre-suit binding arbitration program.

Vacation Rentals. SB188, HB425, HB603 seek to prevent counties and municipalities from regulating “vacation rental.”

HOA Regulation. HB295 seeks to extend the Division of Condominiums, Time Shares, and Mobile Homes jurisdiction to include homeowners’ associations for arbitration of administrative issues including records inspections and allowing the levy of damages for delays in production.

MRTA. SB318 seeks to revise the Marketable Record Title Act to except

homeowners’ associations from the law extinguishing covenants.

Estoppel Letters. SB318, SB398, and HB433 seek to address the timing to provide, the effectiveness of, and charges for estoppel letters, including requiring letters being issued within ten days of the receipt of a request, and allowing requests by e-mail.

Claims. HB377 and SB 204 seek to limit the statute of limitations, the time period in which claims can be brought, against architects and professional engineers.

Community and Cooperative Associations [bill number pending] seeks to clarify retention of official records, limiting the requirement to hold bids to one year, expanding election records to be obtained to include electronic records and for condominiums to clarify that records are to be provided within ten working days, rather than five. For condominiums extending the time for sprinkler retrofit opt-out and to reinforce that buildings under 75 feet or less are not required to take an opt-out vote. Bulk buyer exemptions are extended indefinitely.

Construction. It is rumored that two bills are in drafting to clarify and improve the process for notifying contractors of construction information to reduce the potential of contractor liens.

Keep “tuned in” for more information as it arrives.

Michael J. Gelfand, Esq., Senior Partner of Gelfand & Apre, P.A.

Michael J. Gelfand, the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a Florida Bar Board-Certified Real Estate Lawyer, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is the Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at michael@flcaj.com or (561) 655-6224.

Property Insurance

Gotta have it…Sooo $$$ expensive but terrified to use it: Property Insurance

Most board of directors know they must have property insurance. Most associations buy property insurance. However, most communities don’t know what their “policy” covers. Even though property insurance is purchased to insure and protect us in the event of damage, most boards (and most people) are terrified of making even a single insurance claim. There is a fear that the insurance company will triple our premiums or even drop us from coverage. These are myths our insurance companies want us all to believe.

This article addresses fact from fiction and makes a complicated process a little easier to understand. It is important to ensure your association receives all the money it is legally entitled to receive when something unexpected happens to your association’s property and your association is left with the bill.

Will Our Rates Increase? Will My Condominium or HOA be Dropped from Coverage if We Make an Insurance Claim?

My clients over the last 28 years have repeatedly told me they are petrified of making an insurance claim for fear of rate increases or being dropped. Condominium and HOA insurance claims are different. First, in the event of a named storm (the 2017 hurricane season starts again next month!) insurance companies cannot discriminate against you, raising premiums or dropping coverage, for making an insurance claim. Rates are determined on geography and other factors, not whether you made a claim to have your roof replaced! Further, if they drop you, they are pulling out of the area whether you made a claim or not.

It is purposeful that insurance companies want you to believe they determine your car insurance premiums the same way as your condominium, HOA, townhome, or cooperative. It’s not! Don’t fear repercussions from insurance companies. It’s an urban myth. Florida law protects us from unfair insurance practices.

An insurance company does not determine your rates based upon a single claim. Instead, an insurance company takes into consideration numerous factors in determining rates: age of building, type of construction, cost to rebuild, proximity to the ocean, location within the state, etc. All of these factors come into play, not just whether you made a claim. Further, in the event of a hurricane or when a state of emergency is declared additional community association property insurance protections are mandated.

Keep in mind that a property insurance policy is purchased to provide a sense of security to the insured. In the event of a covered claim, the insurance company must pay for the resulting damages. If a community has property insurance, the members of the association should absolutely not bear the cost to repair property damage which should be covered by insurance. If you are unsure whether the property damage may be covered under a property insurance policy, you should consider contacting an experienced first-party property lawyer.

What is Covered under a Property Insurance Policy?

A community association property insurance policy (“policy” is a friendly way to say insurance contract”) typically covers damages as a result of unexpected events. The coverage available under property insurance policies depends upon the language in your insurance contract. Mostly, association insurance contracts are divided into two categories: (1) named perils and (2) all-risks.

As the name indicates, a “named perils” policy provides coverage only for those perils or causes of loss listed in the policy. Examples of covered perils include fire, lightning, windstorm, hail, and smoke. In contrast to a “named perils” policy, an “all-risks” policy covers all perils or causes of loss not specifically excluded or limited by the policy. Do you know what type of policy your community has?

“First-party” property claims.

You may have heard others use the term “first-party” property claim. This simply refers to a claim by an insured for property damage under its property insurance policy. Common insurance claims include damages caused by hurricanes, tornadoes, rain, high winds, hail, flood, storm surges, fire, water bursts, and many others.

Do I have a “first-party” property claim?

For the most part, your community will know or learn when they have property damage. For instance, in October last year, many condominium associations on the east coast were smashed by Hurricane Matthew. My personal house was significantly damaged. I made an insurance claim. They paid, my premiums were not raised, and my coverage was not dropped.

There may also be damage that was unknown for some period of time; that does not mean insurance will not cover those damages. An experienced first-party property damage lawyer or public adjuster are best suited to conduct an investigation of the damages, determine the covered cause of the damages, and present the claim to the insurance company. Please do not simply rely upon the insurance company’s “Independent Adjuster”, they are almost exclusively hired by the insurance company. “Independent.” No way. Please get a second opinion on the amount and cause of your damages.

Whose insurance applies?

Another issue an association faces when there is property damage is whose property insurance policy applies? This is where association’s declarations come into play. The declarations dictate what coverage the association must buy versus what an owner should have.

For instance, a condominium’s declaration may require the association to buy a property insurance policy which covers only the common elements. Common elements include the drywall inside the unit but not the wall coverings (e.g., paint, wallpaper, etc.). So, if there is a covered loss which causes damage to the interior of a unit, the covered damages under the condominium’s property insurance policy will differ from a unit-owner’s property policy.

Delay, denial, or underpayment – an Insurance company’s “Bad Faith”.

Insurance companies want to be perceived as having your interests as paramount. “You’re in good hands with Allstate.” “Nationwide is on your side.” “Like a good neighbor, State Farm is there.”

Yet, the reality is insurance companies are businesses, and all businesses are concerned about profits. As such, insurance companies may instruct their adjusters to deny claims even though the claim may be covered, pay as little as possible for covered claims, or even deny paying claims all together.

The Florida Legislature has recognized this conflict of interest between insurance companies and insureds and has set forth standards for an insurance company to act in “good faith.” For instance, an insurance company must adequately and timely adjust a claim and must settle claims in “good faith.”

Instead of quickly resolving a “first-party” claim, all too often insurance companies delay their investigation only to later issue a denial or underpay the claim. These “bad faith” tactics are what the Florida Legislature sought to abolish, but insurance companies still act this way in the name of corporate greed and profits. Please consult with your lawyer or obtain a qualified independent second opinion to protecting the interests of your community.

Fearing your insurance rates will be tripled or dropped is simply not true. Buckle up, batten down the hatches, and have your community association lawyer on speed dial.

Alan Garfinkel has counseled homeowners, townhomes, condominium associations, and individuals throughout Florida from his same Central Florida office for 25 years. He continues to passionately work for those living in and working for community associations. Garfinkel received the highest ethics rating (AV) for more than a dozen consecutive years. Attorney peer review ratings provide objective grades based on confidential evaluations by attorneys and judges measuring a lawyer’s ethical standards and legal ability. Garfinkel Whynot only represents community associations, not big corporations like developers, banks, and insurance companies that can develop conflicts with communities. For more information, visit www.MyGWLaw.com.

Condominium and HOA Q & A

Q Our HOA board has solicited a vote of the membership to amend our covenants to add the following provision: “Meetings or gatherings of six or more people may not occur in a house more than one time in a 30-day period.” Additional ‘meetings’ would require board approval. The board said we need to pass this amendment to prevent a house in the community from being used as a sober home, but, it sounds like they want to dissuade lawful assembly. Would the above be legal?

A I can think of a number of problems with the proposed amendment. First, it is unlikely to be effective for its intended purpose. Courts have ruled that the rights of persons to live in group homes may be protected by the Fair Housing Act’s prohibition against discriminating against disabled persons. The fact that the rule or covenant is not expressly directed against group homes is not going to save it from the Fair Housing Act. Disabled persons are entitled to accommodations of housing provider covenants, and your “meeting” rule would be no different. So called “sober” homes have become a significant concern in HOA communities throughout Florida, and I have seen a number of creative attempts to protect communities from them, but all of the options are currently speculative at best.

Second, I wonder if the covenant, as broadly as it is worded, would survive judicial review in the first place. It’s true that amendments to covenants are afforded a broad presumption of validity, and are rarely invalidated—but in this case, I agree with you that the covenant bumps up against not only your basic right to freely associate, but also conflicts with other easements that likely already exist in your covenants (such as the rights of owners to have guests, and to have their guests cross the common area roads). Further, your board has already strongly suggested that it intends to arbitrarily enforce the rule by offering owners an exception to the limitation with board approval. Obviously, this is intended to allow them to prohibit sober homes while offering owners exceptions so that they can maintain normal guest access. If the covenant isn’t invalidated outright as being arbitrary in its application, the actual arbitrary exceptions are going to create a selective enforcement defense that will prevent the HOA from enforcing the rule against sober homes.

Also, what about homes where six or more people are permanent residents? Why would that not be considered a meeting that would violate the rule? I suspect that you are paraphrasing the rule a bit, but if it’s as simple as you’ve made it out to be, I don’t see it having very much effect. Your owners should also consider whether the fear of sober homes is worth approving a very significant restriction on the rights of all owners to have guests visit their home.

Q We were planning on remodeling our kitchen in our condominium unit in March. However, we were told by the condominium president that this work can’t be done in season. Unfortunately, all my condominium documents, including the bylaws, are in my house up north. I have borrowed someone in the building’s documents, and I can’t find anything in them regarding when you can do improvements to your unit. The only thing I found is the hours work can be done.

I have addressed this with the president of the association, and he said his bylaws are in his home up north, but he insisted that you can’t do work in season. He suggested that I do the work in the summer or fall. But, I only spend about four months here, and I do not come back in the summer or fall. I want to be respectful of condominium rules, and if this is indeed a rule I just want to see a copy. I’ve asked a few of the condominium owners and no one seems to have a copy of this rule.

A The president and others have referred to this rule as being part of the bylaws, but that is unlikely. Bylaws usually deal with corporate governance, whereas a rule restricting the use of your unit is more likely to be found in the declaration of covenants, or in the rules and regulations passed by the board of directors. Either way, though, I do think a covenant or rule restricting when you can remodel your unit is likely to be enforceable (covenants are afforded a broad presumption of validity, whereas board-made rules must pass a reasonableness test). These rules are fairly common in condominiums populated by snowbirds, particularly because people only spend a few months in their units, and they want to be free of construction noise during their vacations.

As for seeing a copy of the rule, every condominium in Florida, even smaller ones, are required to maintain certain official records, including a copy of the governing documents. If you make a written request to see these documents, the board is obligated to allow you to inspect them within ten business days. If they do not, you can file a complaint with the Division of Condominiums, which has the authority to order the association to provide the records, and to award you up to $500 in damages.

Ryan D. Poliakoff is a Partner of Backer Aboud Poliakoff & Foelster and serves as general counsel to condominiums, homeowners associations, and country clubs throughout South Florida. He is the co-author of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op, and HOA Living. In addition to representing associations, he is a frequent contributor at seminars and workshops for attorneys and board members, and he has written hundreds of articles for magazines and newspapers throughout the United States. He can be reached at rpoliakoff@bapflaw.com. For more information about his firm, visit www.bapflaw.com.

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