Attention: the text below is the exact transcript taken from the above webinar “2023 Attorney Jamboree” recorded on January 19th 2023. Nothing has been added or modified. These transcripts only include the attorneys’ presentations. They do not include sponsors’ introductions, questions, and answers. Please note that transcription refers to the process by which audio is converted into written text. They help us make our video content more accessible to disabled viewers. 

Airbnb and Renters – Steven Rappaport, Esq.- Sachs Sax Caplan

I’m going to try to hit some of the key points that come across in my practice from time to time and some of the more important things that I think you should know. Starting off with I think the most important thing that I want to stress is, when you’re thinking about doing a rental restriction you really need to put it in your declaration. I can’t tell you how many times I see rules and regulations trying to substantively amend the leasing restrictions. This is really something that needs to be in your most superior document. I suppose there may be some very limiting situations where you might be able to get away with doing some things in your rules depending on the language of your declaration if you have broad rule making authority but the bottom line is that these are substantive lease restrictions they really need to be in the documents that bind the use of the land and that’s your declaration. 

First of all, rules and regulations are judged on a reasonableness standard as opposed to your declaration which is presumed to be valid and enforceable. You don’t want to have a rule that conflicts with a superior document like your declaration and what I mean by that is your rules and regulations can’t provide additional restrictions that conflict with anything that is in your declaration. And your declaration probably talks about leasing so you don’t want to put yourself in an enforcement problem by putting something in your rules that conflicts with your declaration. 

I know there are many declarations that don’t have leasing restrictions in them and I know many associations want to put their restrictions in the rules where the declaration is silent but I will caution you for the most part you can almost always find something in the declaration that will be a conflict even if it’s a very simple statement in your easement provision that says that the property is for the use of the owners, their tenants, guests and invitees. To me, even the mere mention of the world tenant without further restriction implies the ability of that owner to rent that unit without further restriction. So to put these restrictions in your rules, I think opens you up to challenge that it’s a conflict so again point number, try to get it in your declaration. I know that’s going to require some sort of majority, probably two-thirds or even three quarters vote of the owners but it’s worth it and it’s going to  make your lives easier. 

Ok, so, we’ve gotten to the point where we’ve accepted that we need to get an amendment to the declaration. What are the pitfalls, what are the problems with doing that? Unfortunately there are a couple of statutory issues now for both condos and HOAs with regard to leasing restrictions. It wasn’t always the case for HOA until about a year ago. it’s been that way for condos. So I want to go through these statutory issues because it’s very important to keep these in mind when you’re moving forward with a potential leasing restriction. And of course you must be asking, the language must be the same in 718 and 72, right. They would have to put the same language in both statues because that would make sense. Of course, no they did not, they couldn’t be more different.

So let’s start with the condominiums first. For many many years now, 718 has had the language in it that has said that if you were trying to prohibit rentals,if you’re trying to change the number of times a person can rent, or if you’re trying to change the minimum lease term of a rental it will only apply to those people who vote in favor of it or those who purchase or take title after it goes into effect.

So, it’s sort of a grandfathering provision for existing owners that if they don’t want to vote in favor of something or if they’re already in place they’re not going to be subject to those three specific types of leasing restrictions and there’s no exceptions to that in 718. So, it’s again prohibiting rentals. The number of times you can rent or change the least term that’s acceptable to the association that will only apply either to future owners or those who actually vote in favor of it and therefore buying themselves to that restriction. Well, let’s look at the HOA provision, what 720 now says and this is as of 2021 so this is a  very new development. Up until 2021, we were allowing HOA to do anything that they wanted to do because people took title knowing that the documents could be amended from time to time and they took that as a risk. But now, 720 has a similar language to 718 but it’s different and in two very important ways.

720 now says that any amendment that prohibits or regulates leasing agreements will only apply to those who vote in favor of them or who purchase or take title after they go into effect. What does it mean to regulate a leasing agreement? and arguably that’s pretty broad. That certainly means changing the lease terms, changing the number of times you can rent or prohibiting these things but does that also mean having a screening process? charging a screening fee? charging security deposits? having an approval? and there’s certainly arguments to be made that any of those types of restrictions could relate to regulating the leasing agreement itself. So in my opinion 720 is much more broader than 718 and what you can do in applying it to existing owners but with an exception. And this is interesting that 720 has this exception.

You can amend your documents for an HOA to provide for a minimum lease term of at least 6 months or to provide for no more than three rentals in a year, and that will apply to everyone. So think of what you have here. You have condos where you have explicitly three things you can’t do yet you can’t apply, except for those who vote in favor of it or future owners.

HOAs you have pretty much almost anything you can’t do except these two things six months or less or three times or more a year you can do for everybody. So this is creating a lot of confusion. It actually makes no sense why these two Provisions are different. I’m hopeful that in the next year or so we’re going to see a  glitch bill that maybe makes these identicals. My hope would be for the 718 language on the three things to be put into 720. And then for the exceptions for short-term rentals to be put into 718 so that they’re both consistent on both parts. But well,l we’ll see what the legislature does but again keeping in mind that if you’re a condo or an HOA if you’re thinking about doing a leasing restriction be very careful in what you’re doing and understand that it may only apply for moving forward futuristically or to those people that actually find themselves by voting in favor. 

Covenant Enforcement – Nataly Gutierrez, Esq. – Peyton & Bolin 

I thought it best to focus today on how can the association set itself up for success when enforcing the governing documents and the covenants. To do so, I think we need a better understanding of some of the defenses that owners can raise to justify their violations of the covenant such as the waiver defense or the selective enforcement defense. 

Waiver comes up a lot when associations are trying to enforce their governing documents. Courts have found that if an association is  aware of a violation for a lengthy period of time without raising any objections to it, it may have waived the right to enforce that violation later since a reasonable inference can be made that association is willing to tolerate that violation. So one of the takeaways that I always inform our associations of,  is to begin enforcement actions of a violation timely after learning of that violation in order to mitigate a successful waiver defense down the line.

So if you know that someone is keeping a pet against the restrictions in their unit or if you know they put up a screen enclosure in violation of your documents, don’t wait 2 to 3 months or years before starting enforcement efforts. An enforcement effort can be sending that  violation letter or that warning letter to the owner letting them know what it is that they are violating. Giving them a time to cure that violation and a reasonable time to comply with that notice.

Another defense we see come up often is the defense of selective enforcement and it’s raised when an association tolerates a violation by one owner and then chooses to undertake enforcement action against another owner in connection with a substantially similar violation. This one is a defense that in particular courts have found that if the owner can show that they were targeted for an enforcement and the association at the same time was tolerating this violation from another owner that restrictions will not be upheld against that particular owner. We see this a lot when an association has gone a length of time not enforcing certain provisions within their governing documents.

So associations may occasionally find that in particular provisions in their governing documents such as pets restrictions have not been enforced for some time. The board realizes that these restrictions existed in the governing documents and then they decide that they want to go ahead and start enforcing those restrictions. But how can they do so and not run into problems with waiver and selective enforcement. 

Oftentimes we tell our associations that this can be achieved through effective communication with your community. The association can revive its governing documents if it first provides notice to the community of its intent to do so. Hopefully gives them a reasonable time for those who might be violating these restrictions to cure these restrictions. Thereafter, it can start prospective enforcement of the governing documents. Now, I say this with a caveat because I do recommend that you speak to your association attorney when deciding if certain owners should be grandfathered into some of the conduct that they were doing that may have violated the restrictions in the past. Because there are certain situations where they should grandfathered in to best protect the association from any waiver claims or possible selective enforcement down the line. 

But if you do have these restrictions in your governing documents that perhaps have not been enforced uniformly or in some cases not at all, you can revive them. You just need to submit the proper notice to the community and we often call this republication letter sometimes it is referenced as a chattel shipping letter. But properly notifying the owners of the future enforcement does help put aside some of these arguments or appearance of unequal or selective enforcement down the line. And to recap, if the association wants to succeed in its covenant enforcement endeavors two of my recommendations is to uniformly apply your restrictions against all owners and residents and to do it so timely. I think one of our biggest issues that I’m seeing on my end with some of my communities is that they’re not timely acting on some of these violations and it seems like they’re waiving their right to do so. 

Collection Procedures – Tips and Strategies – Scott J. Lee, Esq. – SJW Law Group

Generally speaking, my philosophy is to be aggressive and the dozens of communities that I represent mostly in Palm Beach county. The aggressive collection approach and not doing something non-compliant with the statute but following the statute to the T, typically generates the best collection results. 

And here are the four stages of collections, which were actually modified to some degree about two years ago where there was an initial stage which was added, and that is called the notice of late assessment letter that generally is sent by the property management company. 

The legislature of Tallahasseecame up with the idea that let’s carve out the attorneys from the beginning aspect of the collection process and have the property management companies themselves send out the notice of late assessment which will perhaps keep a lid to some degrees on attorneys fees that are going to accrue on a delinquent account. So before the account could be turned over to the law firm now typically it’s your management company. If you’re self-managed then I guess someone within your self-managed community has to do this although it’s not advisable to send out this notice of late assessment letter that has make reference to the outstanding assessment late fees and interests. 

The owner has 30 days from the day to that notice of late assessment letter to pay the delinquent balance and if it’s paid, wonderful and the account is cured. If the owner does not pay the balance in accordance with the amount set forth in the notice of late assessment then it’s to be turned over to the attorney to go through the next three stages, potentially. The collection process starting with something called the notice of intent to file a lien letter colloquially also known as a demand letter and that’s the attorney demand letter setting for the unpaid assessment,late fees interests, plus the attorney’s fees as the total amount that must be remitted by the owner to the association in order to make the account cured.

So, the amount should be remitted to the association but to the law firm directly so the law firm could make note of it and communicate to the association that we’ve received collection that would put a hold or a stop to the next stage. 45 days after the notice of intent a lien letter has gone out and the account is still delinquent and this now applies both in the world of condominiums associations and HOAs, it used to be different a few years ago, it was 30 days in the world of condominium associations but that was adjusted to make it consistent with homeowners associations where 45 days later after notice of intent to file lien/demand letter is sent out and the account is still delinquent the owner has not paid then then we move to the claim of lien stage and this is the instrument that again makes reference to all the amounts that are outstanding on paid assessments, interest late fees, attorneys fees. And that documents gets recorded in the public records, it’s a pretty big deal and that shows publicly as a lien on the person’s on the owners’ real estate, it’s critical and it’s required statutorily for that claim of lien to only be done by an attorney. 

I’ve seen it in the past unfortunately, where collection agencies were taken upon themselves to do these claims of lien and that is the unauthorized practice of law so whether you’re using a collection agency or if you’re self-managed and you’re tempted to file liens on properties for unpaid assessments that’s problematic and it’s actually technically a crime, so make sure your law firm doing your association collection handles that. The big decision,thereafter comes if the accounts still is not paid and 45 days has gone by since the recorded claiming lien was sent out to the owner. That’s when the association, the board of directors, in conjunctions with significant analysis and discussion with association council decides to take the next serious step of filing a lien foreclosure lawsuit. And that is exactly what it is, it is a foreclosure lawsuit, just like a bank can foreclose on a mortgage, we as an association can foreclose on that lien and that means we can actually take that property within the association upon the conclusion of that lien foreclosure.

Sometimes, when the litigation is concluded, what occurs is that there is a third party that bids at the lien foreclosure sale. So, just like with a mortgage foreclosure sale when and if a final judgment before closure is obtained the property gets put up for auction and there is a bidding process. The association doesn’t have to come up with money to bid at their own lien foreclosure sale. They have an automatic bid equal to the final judgment that they’ve obtained in the course of the litigation.

However, if a third party interested in this property wants to swoop in and buy this property, they’ll have to pay more than the final judgment about and if that takes place that money is deposited with the clerk of court and the association will get a remittance for the amounts that they’re owed pursuant to the final judgment and the third party will end up being the owner of that property. However, the association has the plan on the possibility of owning this property at the end of the lien foreclosure process because if there is not a third party that steps in and bids beyond the final judgment amount, the result will be that title to the property will be awarded to the association through something called a certificate of title issued by the clerk of court and that is just as good as a deed and it’s evidence of ownership so this is a big deal. 

The association becomes the owner of the property. Maybe, not a great idea for the association to go that route and become the record owner what are the factors as part of the decision making, the condition of the home, is there an existing mortgage on the property, the ability to rent out the property to third parties and recover some income all those kind of business elements needs to be taken into consideration when taking the plunge into a lien foreclosure lawsuit which is more expensive and more costly filing fees,court reporter fees, process server fees and attorneys fees certainly go beyond just the filing of a lien or sending out a notice of intent to file.  

Construction Law  – Jeffrey Green, Esq. – Kaye Bender Rembaum

What I decided to talk about today is a very important and often misunderstood topic that is very topical right now with all of the recertification processes that we’re going to be going through which could be obviously hundreds of thousands multiple million dollar projects. In order to best protect the association for these types of projects and really any project that is over 100,000 dollars, I recommend the association take out performance and payment bonds. Oftentimes associations’ board of directors don’t really understand what performance or payment bonds are. They kind of confused it with insurance and bonds are not insurance. They’re not there to protect the association against damage to other property. That’s really what general liability insurance is for is if the contractor damages not the work he’s doing but another component of the condominium or God forbid if he heard someone outside of his scope of work while doing the work. That’s general liability insurance.

What bonds are specifically performance bonds are there to ensure that the contractor either completes his work if he abandons the project or the work is repaired if the contractor does it wrong or replaced if it needs to be replaced. So performance bonds to me are the most important bond that an association should take out as part of a project.

They’re typically 2% of the project costs and that cost is born by the association and is well worth it. So, when you do your budgets, always budget 2% for these bonds. The flip side of not taking one of these bonds out could cost the associations hundreds of thousands and millions of dollars if a contractor goes out of business or abandons the project. 

So a performance bond, the first type of bond I’ll talk about, as I said it obligates the contractor or the surety in this case who issues the bond to complete the work if there’s an issue with. It it’s very important that the association or the board of directors follows the appropriate procedures for implicating the bond because as we all know, no one wants to pay. Sureties don’t want to pay, they look for any excuse not to pay. So, it’s very important as soon as the association’s board of directors discovers an issue with their project is to notify the surety that you’re considering declaring the contractor in default. At that point, the surety is then obligated to meet with you and see what they could do to try and get the project resolved at that point.

They can’t get the project resolved at that point the board needs to formally terminate the contractor and then tell the surety that they want to surety take over and also that the board is willing to pay the rest of the contract balance to the surety to finish the job. It’s very important that the board does that and follows that proper procedure. Obviously if you’re in this situation you’ll need your attorney to help you out because you won’t want to miss any sort of procedural requirement that then doesn’t obligate the surety to pay. 

A couple of other things that are very important. Don’t make a big change to your contract, don’t add another scope of work for a million dollars because you have a contractor there without either getting a new bond or modifying the existing bond. The surety is only obligated to the original scope of the contractor and you agree to perform.

So again if you’re going to make what’s called a cardinal change to the bond, notify the surety. Another important thing to remember is don’t overpay the contractor or don’t perform repair work yourself without notifying the surety because it’s their obligation to do the repair work. If you come in there and hire someone else they’re not going to pay for it. They’re going to say they could have done it cheaper or they would have found a different way to do it. And one last consideration with performance bonds is the surety is limited to the penal some of the bond meaning the contract value so if you sign a contract for a million dollars and the contractor absconds, the sureties limit is only up to that million minus any payment you made to the contractor. 

 Another very important bond that you’ll hear about is payment bonds these are absolutely necessary for any project to avoid the quote dreaded liens. I’m sure you’ve all heard liens, probably the worst thing you want on one of your properties or your condominium because then owners can’t close, there’s a painful process of having to get partial releases of liens. 

So to avoid that, for any project get a payment bond that guarantees that subcontractors are going to be paid. You still have the issue of the contractor you have to pay the contractor  or work out the contractor, he can file a lien but for the subcontractors, materials, suppliers, you’ll want a payment bond. There are two types: a conditional and an unconditional. Ideally, you’d want an unconditional that just means no matter what the payment bond has to pay for the subcontractors. But those are harder and harder to get in today’s market. You’re likely going to get what’s called a conditional payment bond meaning the association still has to make proper payments to the contractor to get your releases. Once you make proper payments as long as you’ve made proper payments you will then be protected from a lien from subcontractors or suppliers. 

SB4D Law  – Jeffrey Rembaum, Esq. – Kaye Bender Rembaum

We’re going to talk about the Milestone Inspection and we’re going to talk about the structural integrity reserve study. Let’s talk about the Milestone first, who does it apply to, condos and cooperatives and this is all very general right now there are going to be some specific exceptions along the way maybe some of you will ask questions about it but it applies to condominiums and cooperatives buildings three stories or higher but not to single-family, two family, three family buildings with three or fewer habitable stories, try to say that five times fast.

Now, when do you have to do it well, if your building is going to be 30 years after the date of the certificate of occupancy or if you’re within 3 miles of the coastline then within 25 years of the certificate of occupancy. And if you’re already at the 30-year mark from the certificate of occupancy then you have to be compliant with your Milestone by 2024. There are two phases, phase 1 and phase 2. Who prepares it? The Florida license architect or engineer. Phase one is visual of the report itself but if you’re dealing with these experts it’s very unlikely I think that they’re going to not go into a phase 2. Phase 2 provides for further testing and destructive testing as the expert may deem necessary.  What do you do after you get the report? It must be provided  to your local government. The association must post it in a conspicuous place, you must also post it to the website if in fact you have a website, you need to send it, mail it, provide it to all of the owners at their official addresses. You have to maintain this report for 15 years the failure to obtain the report while not specifically in the legislation is arguably a breach of fiduciary duty. We are talking about the Milestone which is a structural inspection. 

Remember the architect or engineer who does the report gives it to the local government. When do you have to make the repairs? Generally speaking, within 365 days of receiving your Milestone report.  Maybe sooner if in fact the repairs are imminent based on the experts report that says you have to do this tomorrow then you have to do that tomorrow. 

The Structural Integrity Reserve study (as we affectionately refer to it as the SIRS), who does it apply to? Generally speaking, once again, condominium, cooperative buildings three stories or higher. When do you have to have your structural integrity reserve study by December 31st 2024?

At least every 10 years after that you must continually do it every 10 years. That’s your update process.  Who completes it?  Any person qualified, but the structural integrity portion of the reserve study must be completed by a Florida license engineer or architect.

The report must contain the list of the areas inspected, the estimated useful life, the estimated repair costs and deferred maintenance, etc plus the recommended annual amount to be set aside in the reserve. Yes, you can take into account any changes in the estimates and expectation of life of the component because you have made repairs and things like that. If you fail to conduct it in the legislation this is a statutory breach of fiduciary duty. Board members, don’t let that happen to you. Waiving and reducing, you cannot  waive or reduce these reserves after December 31st 2024. No longer can you waive or reduce reserve, these will be mandatory.

Timing, you must have your report completed, remember by December 31st 2024

And if you really play with the timing and you think this through a little bit. If you would adopt your 2025 budget in 2024 but you did it in October and then you receive your structural integrity reserve study in December more likely than not the first year study of the structural integrity reserved study components would be funded might actually work out to 2026. Just depends on how you want to play with the dates in the legislation itself and if you’re risk tolerant or not because the division of condominium may have a different feeling about that but a plain  meaning of the statute lets you get there.