Internal Operating Procedures

Internal Policies Versus Rules: Avoid Creating A Duty That Leads To Liability

By Michael J. Gelfand, Esq. / Published March 2024

What happens when a retail business rotates a fourteen-year-old tire, even though the company’s internal policy requires it to refuse to work with a tire that is ten years old or older, and the older tire’s tread separates, causing a fatal accident? Can the business be held liable just because it violated its own internal policy? As we see by the following case, evidence of a business’s internal policies, alone, does not create a duty owed to the injured party.

     Before examining the case’s history, a question: Is your community association one of those that adopts a lot of rules? Where does your “business” draw the line as to what should be adopted as an exalted “rule,” and what is but a “mere policy”? Although rules usually must be adopted by an association’s board of directors, sometimes the governing documents require owner approval.

     A policy, though, is frequently created by management or the president of the association without approval of the board of directors. Why? Though not defined by the HOA Act, a “policy” usually addresses an association’s internal conduct and does not regulate the conduct of an owner or guest, which is the purpose of a rule.

     Nevertheless, there have been questions regarding whether a policy can be used against an association. As readers of the monthly Memorandum to Clients series have seen, there are not many appellate court decisions that directly address Florida community association law issues.

     Where do we find guidance? We look at cases that arise within other types of businesses and apply by analogy. This month we learned a lesson of liability from the vehicle tire industry where the clash between a policy and liability broke through the surface and had to be addressed.

     How did this occur? Recently a Florida appellate court ruled that an organization’s internal policies alone do not create or define a duty to prevent injury, in this case a death. The facts in Discount Tire Co. v. Bradford, 48 Fla. L. Weekly D 2127 (Fla. 5th DCA, November 3, 2023), indicate that Michael Bradford took his truck to Discount Tire to purchase two new tires. Discount Tire placed the new tires on the rear wheels and removed the 14-year-old tires, placing the older tires on the front of the truck. Later while on a highway, one of the older tires had a tread separation, resulting in the loss of control that led to a crash in which Michael Bradford and his son were killed.

     Notable for Florida community associations which create operating policies, as well as other organizations, Michael Bradford’s wife sued Discount Tire alleging that an industry standard required Discount Tire to take the 14-year-old tires out of service because they were too old. The owner of another business testified that Discount Tire had an internal policy that any tire over ten years old was not to be used. Although the trial court originally entered final judgment for Discount Tire, the court reversed itself and granted the plaintiff’s motion for a new trial.

     The Florida appellate court agreed with the initial decision of the trial court and ordered that the final judgment in favor of Discount Tire be reinstated. Discount Tire’s conduct, combined with Discount Tire’s internal policy to refuse service if a customer did not wish to purchase a new tire to replace a ten-year-old tire, did not create a duty owed to the plaintiff.

     While perhaps inviting poor decision making, this court opinion is important because it highlights that internal policies alone do not automatically create a duty to others. Transferring the opinion to our world, Florida community associations addressing how staff operates, as opposed to the regulation of owners’ conduct, may want to consider adopting internal operating procedures as a policy, not adopting them as rules or regulations.

Threshold Requirements: Who Understands What It Takes To Be A Resident?

     Do your association’s governing documents include a residency requirement for a director? What about leasing or other use restrictions? If you believe the answer is “yes,” how do you know whether the person meets the requirements? Are the requirements specific enough? Too specific? Or like Goldilocks, are the requirements “just right”?

     In a recent decision a Florida appellate court ruled in a case that will resonate with Florida community associations, addressing one of those moments stripped from the local headlines. Thankfully, the issue did not involve an association election, more on association elections below, but addressed in an analogous situation a city commissioner residency requirement. The facts in City of Miami v. Gabela, 48 Fla. L. Weekly D 2213 (Fla. 3rd DCA, November 20, 2023), indicate that Miguel Gabela sought election as a city commissioner for District One. Gabela has lived in the same property since 2000. That property was located within District One under District maps adopted in March 2022.

Photo by iStockphoto.com/YILMAXUSLU

     Of course, creating the conflict, the district maps were changed in June 2023. The result for Gabela was that the same location of his residence was no longer located within the new boundaries of District One. Shortly after the new boundaries were declared, Gabela moved to a new residence that was within the new boundaries of District One.

     To confirm whether he could be a candidate for District One, Gabela sued the City of Miami seeking a declaration that he was eligible. The trial court found that Gabela met the qualification requirements and remained eligible for election in District One.

     The Florida appellate court agreed that Gabela was qualified to seek office as a city commissioner for District One. The court pointed out that the City Charter stated, “Candidates for the city commission shall have resided within the district at least one  year before qualifying and be electors in that district and shall maintain residence in that district for the duration of their term of office.” The City Code required that “[a] candidate for the office of commissioner shall … [h]ave resided within the district they wish to represent for at least one year prior to qualifying.”

     While the City argued that these provisions required “continuous” residence for the year “immediately preceding” qualification, the appellate court looked at the plain language of the Code and rejected the City’s argument. The court concluded that the City’s district residency requirement did not require continuous residency or even residency immediately preceding qualification. “We decline the City’s invitation to add by judicial fiat what the plain language of its charter provision doesn’t require,” the court stated.

     Residency requirements can pop up in a number of circumstances regarding what rights an owner may exercise. Concerning election of directors, while the Florida Condominium Act does not expressly address residency requirements, the Division of Condominium’s arbitration section has opined that condominium association residency requirements are forbidden; however, there does not appear to be a written Florida appellate court decision addressing the issue.

     The Florida Homeowners’ Association Act, Section 720.306(9)(a)., Fla. Stat. (2023), appears to shut out residency requirements in Florida homeowners’ associations by stating “…all members of the association are eligible to serve on the board of directors” with exceptions for non-residency-related misconduct.

     The lesson learned for Florida community associations is to review requirements well in advance of trigger times, such as adoption of use restrictions based on residency or for the daring condominium association election notices. It seems that a number of associations are facing increased numbers of non-resident owners, with there being concerns by some when hedge fund and other institutional investors start buying many parcels in a community. Thus, residency issues are becoming more common.

Michael J. Gelfand, Esq.

Senior Partner, Gelfand & Arpe, P.A.

     Michael J. Gelfand, Esq., 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 dual Florida Bar board-certified lawyer in condominium and planned development law and in real estate law, a certified circuit and county civil court mediator, a homeowners’ association mediator, an arbitrator, and parliamentarian. He is a past 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 ga@gelfandarpe.com or 561-655-6224.