Indemnity and the Association

Indemnification. A scary word and a confusing subject. However, almost all contracts for services contain requirements for one party to indemnify the other from damages. Often these clauses are in small type of allegedly “standard form” agreements. For purposes of today’s blog, let us discuss non-construction services. Indemnification for construction contracts is governed by section 725.06, Florida Statutes which is not applicable to non-construction contracts. Look at any contract you have with a service provider and inevitably the following language, or similar, will appear:

Party A agrees to the fullest extent permitted by law, to indemnify and hold harmless Party B, its officers, directors, members and employees from all liabilities, damages, losses and costs, including but not limited to reasonable attorney’s fees, to the extent caused by the negligence, recklessness or intentional wrongful conduct of Party A.

In layman’s terms, this means that one party (the indemnitor) has contractually obligated itself to protect a second party (the indemnitee) against damages which may result from the indemnitor’s conduct. These damages would include any foreseeable damages resulting from a negligent act or omission, including damages to person or property. Sounds easy enough. However, who is indemnifying whom?

The language most often seen in these contracts is similar language to the form language above:

Association agrees to the fullest extent permitted by law, to indemnify and hold harmless contractor, its officers, directors, members and employees from all liabilities, damages, losses and costs, including but not limited to reasonable attorney’s fees, to the extent as a result of any work done at the Condominium by contractor.

The Association has agreed to indemnify the contractor for work done at the condominium by the contractor. It requires the Association, which does not control the project or those working on it, to protect the contractor. Why would the Association agree to this? Think about the fire alarm monitoring, elevator maintenance or other monthly service provider. Many of these companies perform services, which if done improperly, could result in damage to persons or property and ultimately claims against the Association. Courts will enforce such agreements to indemnify, even if it is a bad deal for one side.

All service contracts should require the contractor to indemnify the Association. If the contractor will not negotiate the term, then another contractor should be considered. These terms, like most contract terms, can be negotiated even if the contractor says such terms are “industry standard.” The Association should be protected from sloppy safety procedures, carelessness or negligence of the contractor. Finally, remember that indemnification in the absence of adequate insurance may be illusory, but that is a subject for another day.

Sanjay Kurian, Esq.

Board Certified Construction Law Attorney, Becker
Tampa
 | bio

Attorney-Client Privilege When Board Members Sue the Association

Many Associations have just completed their election season and find that a person or persons newly elected to the Board are involved in a case being defended or prosecuted by the Association. Now what? Clearly, a conflict of interest exists but participation in a lawsuit against the Association is not one of the factors that makes you ineligible to sit on the Board. Therefore, the person(s) can take their seat on the Board so long as every other aspect of the election process was valid. The Board however still needs to take measures to ensure that the strategy and legal opinions obtained from counsel on behalf of the Association continue to be privileged. This can be accomplished in a few ways. One option is for the person(s) with the conflict to recuse themselves from participating in any meeting/vote regarding the lawsuit. Their fiduciary duty to the Association would be fulfilled but what if that means there is no quorum of the Board to make a decision? Also, they would have to know of the meeting in order to recuse themselves and this would tip them off that something was up? The better alternative is to have an open Board meeting for the sole purpose of creating a committee of members of the Board who do not have the conflict of interest. This meeting would be open to all members of the Board and the Association. The persons with the conflict should be allowed to vote on the issue and their fiduciary duty should dictate that they vote in favor of such a committee. During this meeting the Board should also vest all powers necessary to allow settlement or resolution through appeal in the committee. Otherwise, if the committee continually had to return to the Board for more authority, the person(s) with the conflict would be able to deduce what was going on and the creation of the committee would be for naught.

If the Association is one in which the majority of the Board makes up the person(s) with the conflict, there will not be enough disinterested Board members to create a committee which could handle the litigation. The option then is to have non-board members partake in the committee. In this instance, the Board should decide how many additional persons are needed. My recommendation would be if you have a 5 person Board with 3 persons having a conflict, that you add 3 additional non-board members to the committee. The most diplomatic way to do this would be to have an open Board meeting for the purpose of the creating the committee but advising on the notice that the Board will seek 3 volunteers to sit on the committee from the non-Board members. During the meeting, the Board would explain the purpose of the committee, the fiduciary duty to the Association and the requirement that the privileges afforded a litigation be preserved despite any friendship with the person(s) having the conflict. For obvious reasons, relatives of the persons with the conflict should not be allowed to sit on the committee. Should only 3 volunteers seek to be part of the committee, nothing else is necessary. Should however more than 3 volunteers seek to be part of the committee, the Board should vote on each one until the 3 spots have been filled. Another option would be to have the members vote on the volunteers.

Please note, if your governing documents provide another procedure for setting up a committee (such as landscaping, architectural, etc.) you may want to follow that procedure all together. Similarly, if the governing documents require that you have a litigation committee, then you need follow that procedure, always ensuring that the person(s) with the conflict do not sit on the committee. Regardless of how this committee is seated, the first thing to do is set a closed meeting with counsel. This will permit the attorney to meet the persons she will be dealing with during the litigation. Additionally, the attorney will be able to explain the duties of the committee as they pertain to the Association in terms of the suit and bring the committee up to speed on what is going on in the case. The attorney will also be able to get an understanding of what the committee wants in terms of resolution (i.e., settlement or trial). One last thing, when creating the committee, it should be clear that the committee is created solely for the purpose of the case at hand and all that goes with it (counterclaims, third party claims, etc.) and that it dissolves immediately once the case is resolved. Again, if your governing documents create a method for dissolving a committee, the Association should follow those procedures.

Marilyn Perez-Martinez

Attorney at Law, Becker
Miami | bio

Former Felon Board Member Eligibility

Fla. Stat. §§ 718.112, 719.106 and 720.306 each contain a limitation on an individual’s ability to serve on a community association board of directors if the person is a convicted felon. Specifically, a convicted felon is not eligible to serve on a community association board “unless such felon’s civil rights have been restored for at least 5 years as of the date on which such person seeks election to the board.”

The restoration process for voting rights and a person’s eligibility for such restoration were previously dictated by the rules of clemency that each Florida governor set. Prior to Governor DeSantis, Governor Scott had adopted clemency rules that that differed from prior rules in that:

People with nonviolent convictions had to wait 5 years after they completed all of the terms of their sentence before being allowed to apply for restoration of civil rights.

The 5-year period noted above would reset if an individual was arrested for even a misdemeanor during that five-year period, even if no charges were ever filed.

Certain felons were required to wait seven years before being able to apply to have their voting rights restored, and had to appear for a hearing before the clemency board.

A provision allowing people to apply for a waiver of the rules, in place under Bush and Crist, was eliminated.

Under this system, the Florida Commission on Offender Review had a database that one could search in order to determine if a person’s voting rights had been restored. This database can be accessed at: https://fpcweb.fcor.state.fl.us.  Presently, this database can be used to determine whether a convicted felon can serve on a community association’s board of directors.

The foregoing process has been upended by the passage of Amendment 4 in 2018. Amendment 4 provided that:

Article VI, Section 4. Disqualifications.—

(a) No person convicted of a felony, or adjudicated in this or any other state to be mentally incompetent, shall be qualified to vote or hold office until restoration of civil rights or removal of disability. Except as provided in subsection (b) of this section, any disqualification from voting arising from a felony conviction shall terminate and voting rights shall be restored upon completion of all terms of sentence including parole or probation. (b) No person convicted of murder or a felony sexual offense shall be qualified to vote until restoration of civil rights.

The intent of Amendment 4 was that a former felon’s voting rights would be automatically restored upon completion of the felon’s sentence. Thus, a former felon would not have to go through the clemency process by applying for restoration of voting rights.

This year the Florida legislature enacted Fla. Stat. § 98.0751 to provide additional provisions related to the qualifications for restoration pursuant to Amendment 4 as well as the process for an election supervisor to determine eligibility. Notably, the Legislature also enacted Fla. Stat. § 98.0585 which provides that out of “public necessity that information related to a voter registration applicant’s or voter’s prior felony conviction and whether such person has had his or her voting rights restored through executive clemency or pursuant to s. 4, Art. VI, of the State Constitution, which is held by an agency and obtained for the purpose of voter registration, be confidential and exempt from public records requirements and be used only for purposes of voter registration.”  Accordingly, a voter registration form submitted to a supervisor of election is confidential and not subject to disclosure. Fla Stat. § 98.0585.   

The difficulty that community associations will face is that it is not easy to determine whether a person has completed their sentence as defined by Fla. Stat. § 98.0751 so as to have their voting rights automatically restored.

First, there is not a central database accessible by the general public of judgments of conviction.  One would have to know the county in which the conviction occurred.  Once that information is obtained, the next difficulty is that many judgments of conviction are not readily viewable online through a clerk of court’s online record viewing system thus requiring obtaining the judgment of conviction from the clerk of court. Lastly, while the determination of whether a person has actually completed their prison sentence may be relatively easy to make, whether that person completed any obligation for restitution and the repayment of court costs and fees is not. 

This determination will likely require the assistance of the association’s attorney. While the effects of Amendment 4 will not be fully felt for a few years, the problems in readily being able to determine a potential director’s eligibility may warrant the creation of a database such as the one maintained by the Florida Commission on Offender Review or a legislative change that would make determining whether a convicted felon is eligible to serve on a community association board of directors more straight forward.

Marielle E. Westerman

Community Association Law, Becker
Tampa | bio

Are E-Mails Official Records?

Whether you live in a condominium, cooperative or homeowner association, the Statue governing your community defines the term “official records”. In defining official records, each Statue has a catch-all provision.

All other written records of the association not specifically included in the foregoing which are related to the operation of the Association.

Sections 718.111(12), 719.104(2), and 720.303(4), Florida Statues.

Questions abound as to whether e-mails are official records. The Department of Business and Professional Regulation (“Division”) has ruled that e-mails to an association can be considered official records and are therefore subject to inspection and copying by owners or their representatives. The question is, what are e-mails “to an association?” Are personal e-mails between board members official records? What about an owner’s e-mail to a board member’s email address and the board member’s response to that owner – is that considered an official record subject to another owner’s inspection and copying?

Division rulings have held that e-mails to an individual director or to all directors as a group, addressed only to their personal computers are not written communication to the association and therefore not considered an official record. This is because there is no obligation for a director to turn a personal computer with any regularity, or to open and read e-mails before deleted them. Irzarry v. Laguna Point Condominium Association, Inc., Arbitration case No. 08-05-2791 (April 10, 2009/Final Order). This point was further clarified in the arbitration case of Humphrey v. Carriage Park Condominium Association, Inc., Case NO. 08-04-0230 (March 30, 2009/Final Order/Campbell), where the arbitrator stated that “any e-mails received by, stored upon, or otherwise contained upon or within the personal computer devises (e.g., computers, laptops, cell phones, tablets, etc.) of Directors shall be considered the personal property of the Director upon whose devise said e-mail exists.” I other words, the e-mail does not belong to the association.

However, arbitrator in Humphrey went on to state “[t]he conclusion may be different if the association owns a computer on which management conducts business including e-mails (analogous to government public records); or if e-mails are printed up and passed around for discussion at a board meeting.” In other words, e-mails to an association’s e-mail address, the (“@codename.com”) are considered official records.

It is important to have a clear understanding of and a policy in place related to e-mail to assure that those e-mails that are official records are properly kept and those e-mails that are not official records are properly deleted. There are also exceptions for things such as communications that relate to litigation, which must be considered when creating and implementing an e-mail policy. It is therefore strongly recommended that all associations involve their attorney when formulating their e-mail retention policy.

Steven H. Mezer

Board Certified Condominium and Planned Development Law Attorney, Becker
Tampa
 | bio

Estoppel Certificates

A Requirement of Condominiums, Cooperatives, and Homeowner Associations

Some associations are not complying with the new laws on Estoppel Certificates which is required of condominiums, cooperatives, and homeowners associations. Prior to July 1, 2017, the association only had to provide the prospective purchaser with information about the monies owed to the association attributable to the unit being purchased. Now, the association must provide a certificate with a considerable amount of additional information as described below. If the information is prepared incorrectly the association may be estopped (barred or precluded) from alter going back to that individual for the funds or violations that were omitted from the certificate. My recommendation is that the association have their attorney prepare the initial certificate and provide that certificate to their manager or management company as some of the information requires a review and analysis of the association’s governing documents.

There is a long list of information which is required to be in the estoppel certificate found in Sections 718.116 (Condo), 719.108 (coop), 720.30851 (HOA), Florida Statues which includes (by way of example only and not as a complete list):

• parking or space number, as reflected in the books and records of the association;
• attorney’s name and contact information if the account is delinquent and has been turned over to an attorney for collection;
• an itemized list of all assessments, special assessments, and other monies owed;
• an itemized list of any additional assessments, special assessments, and other monies that are scheduled to become due for each day after the date of issuance for the effective period of the estoppel certificate is provided.

The statue then requires you to provide:

• whether there are any open violations of rules or regulations noticed to the unit owner in the association official records;
• whether the rules and regulations of the association applicable to the unit require approval by the board of directors of the association for the transfer of the unit and if so, whether the board has approved the transfer of the unit;
• whether there is a right of first refusal provided to the members or the association, and if there is if the members of the association have exercised that right of first refusal; In addition, the association is also required to provide a list of, and contact information for, all other associations of which the unit is a member, provide contact information for all insurance policies maintained by the association, and provide the signature of an officer or authorized agent of the association.

For some associations, your manager has handled this certificate when it was just a matter of filling in the amounts owed, because they took care of the accounting for the association. However, reviewing and analyzing association documents to correctly answer the questions on rights of first refusal and other legal issues should be handled by your association attorney and then provided to management for future use thereafter. Further, if the management contract does not provide for charging for estoppel certificates, the Board will need to approve a resolution in order to do so.

Steven H. Mezer

Board Certified Condominium and Planned Development Law Attorney, Becker
Tampa
 | bio

Communication With Your Attorney

Most attorneys are adept and accustomed to using a variety of forms of communication with their clients. Most attorneys will also charge for communications with their clients, so clients should consider what is best, not only in the context of cost, but also what is best for providing and receiving legal advice. As an attorney representing community associations, one of the most satisfying aspects of that practice is being able to efficiently answer questions and providing legal guidance to my clients. However, I know that certain methods of communication work better for some clients. If you prefer communication by mail, e-mail, facetime, text, or in person, make your preference known to your attorney.

If you are a community association manager, I can offer you the following seven (7) observations to assist in effective communication with counsel:

1. Designated Point of Contact. The Association should designate one person to communicate with the attorney, while providing copies of that communication to all board members in a confidential setting. If we assume that the typical board of directors has five members, the association does not want to pay for five separate communications with the attorney regarding the same subject matter, plus a communication between the community association manager and the attorney. The attorney does not need to receive six almost identical communications regarding the same issue. The community association manager typically has good communication skills and can succinctly state the legal issue and related questions, therefore, he or she is often the best choice for both the association and the attorney. Sometimes, one or more board members wants to assume this role. The association is the client, therefore, this is their choice to make.
2. Ask Specific Questions. The attorney’s response and legal advice are responsive to the question presented. Therefore, a full statement of the relevant facts and a clear statement of the question will provide the most valuable and legally accurate response to the association’s question. Providing an incomplete (intentionally or unintentionally) or inaccurate set of facts may result in the attorney providing an incorrect or even useless response answer to the association’s actual question. This is not the time for secrets, selective omissions or hiding facts from your attorney. Even small details may have legal significance to your issue and to your attorney. Most attorneys will respond to the question as presented and will not make an assumption that the association actually had a different question to be answered. Asking the correct question should yield the most accurate answer, not just the answer that was wanted. Therefore, the statement of the facts and the composition of the question should be given the appropriate attention to detail.
3. Confidentiality. Communications with counsel regarding legal issues are confidential and privileged. Directors should be reminded of that fact on a regular basis. Many attorneys will mark all such communications “Attorney/Client Confidential” and you should do the same. Attorney/client confidentiality may be waived by sharing copies of the communications with any person who is not on the board of directors, therefore extreme caution is required when handling communications with counsel. Please do not share legal opinions with other managers or board members from another community, unless the original recipient gave you written consent to do so.
4. Official Records. Communications with counsel should be segregated in a file clearly marked “Attorney/Client Confidential” to avoid the inadvertent disclosure of confidential communications. These documents containing legal advice of counsel or attorney’s work product are not available for inspection and copying by unit/lot owners.
5. Costs. While we recognize that no one likes to pay attorney’s fees, a short consultation with counsel can often save the association significant funds when the association implements the contemplated action. For example, having contracts reviewed by counsel is a highly recommended defensive action by a board of directors. It is much easier to decide to not enter into a contract due to legally objectionable terms than it is to get the Association out of that same contract after it has been entered into without the advice of counsel. It is usually much less expensive to add legally desirable language to a contract than to later face the consequences of the omission. The adage that “contracts are made to be broken” is neither factually nor legally correct. A court will not save your association from a bad contract, if it is an otherwise lawful contract. Contracts are easily created by conduct, even in the absence of a signature.
6. Communicate, Communicate, Communicate. Your attorney is not a mind reader. It is impossible for anyone to interpret silence. Regular, clear and accurate communication with your attorney can provide you with support and assurance that the board of directors and that the association are operating in compliance with its governing documents and in compliance with Florida law. While it is clear that some legal fees may be a cost of the association “doing business” it is also a form of insurance that is often far less expensive than not communicating with your counsel. Addressing issues and decisions in real time is far less expensive than the litigation that can result from a wrong decision. Communicate early and often.
7. Document the Response. It is basic that a community association should not rely on the manager for legal advice, but that is what often occurs when the manager is asked to relay or interpret a conversation that she or he has had with association counsel. Request a written response, whether it is a confirming e-mail or a formal written legal opinion each time that you seek legal advice. If you want citations to a statute to cases and references to the governing documents, specify your expectations so that there is no question as to the adequacy of the response. Although most legal advice is not a simple “yes” or “no” it need not be a confusing treatise. There are times when you should not get the response in writing, but there should be a reason for not putting the response in writing when that occurs. You have a right to clear understandable response from the attorney.

Finally, communication increases confidence and comfort. There is no (legal) question that should not be asked, if it is a question that you or a member of the board of directors may have. Keep the lines of communication open with your attorney.

Steven H. Mezer

Board Certified Condominium and Planned Development Law Attorney, Becker
Tampa
 | bio

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.