***Updated with Florida’s 2013 Legislative Amendments, Transition of Control of a Florida Community Association

Posted on June 14, 2010 by Gerstin

Transition of Control of a Florida Community Association

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A wise man once said “transitions are never easy”. A wise lawyer once said “transition of control of a Florida community association are never easy and can be disastrous”.

Following is a general list of items for a community association to be aware of as they proceed towards the important process of the transition of control from a developer controlled association to that of a member controlled association. The following information is intended as general information and not legal advice. For legal advice an attorney must be consulted.

We accumulated the following information based upon our experience in representing many community associations and have found the following tasks and information is important for an association’s members to undertake and review prior to signing a release with the developer.

1. Interviewing of banks. Immediately after the transition the association should open new bank accounts. The forms necessary to open the appropriate accounts should be secured now to avoid undue delay.

2. Begin interviewing professionals, which should in the very least include:

a. Accountant;

b. Property manager;

c. Attorney; and

d. Engineer (with experience in community association transitions).

3. If the post office is diverting the mail sent to the association to an address of the developer, secure the forms to have the mail sent directly to the association.

4. Secure from the Florida Secretary of State a statement of change for the Registered Agent. This document can be downloaded from www.sunbiz.org.

5. A form known as “Request for Copy of Tax Form” should be retrieved from the Internal Revenue Service. The completion and eventual submission of this form will enable the association to obtain the previous three (3) years of tax returns after the transition of control is complete.

6. Begin identifying potential candidates for Board of Directors’ positions.

Following are a list of items that we attempt to receive from a developer during the
transition period:

a. A full and complete copy of the association’s Declaration of Covenants and Restrictions, Articles of Incorporation, Bylaws and Rules and Regulations;

b. The financial records of the association from the date of incorporation through the present date;

c. Access to, and control of, the association’s funds that remain in the developer’s bank accounts for the association;

d. Copies of all deeds to common property owned by the association;

e. Copies of the minute books from all of the meetings held by the Director;

f. Bills of sale, or receipts for, any of the association’s tangible personal property;

g. Copy of all contracts to which the association is presently a party. Such contracts typically include landscaping, property management, accounting, janitorial, etc.;

h. Name, address and telephone numbers of all contractors and/or employees that are presently being employed by the association;

i. Copies of any and all insurance policies that are presently in effect;

j. A complete list of all current home owners along with their address, telephone number and, if applicable, section or lot numbers;

k. Any and all warranties the association might possess for items such as air conditioning, the pool, etc;

l. Any and all permits issued by governmental authorities that regulate the association from the present date relating back to approximately one year prior;

m. Any leases for the common areas to which the association is a party;

n. Copy of any master keys or keys utilized for the common areas;

o. An up to date ledger sheet for each owner and any assessment payments that are in arrears as well as a full payment history for each owner; and

p. The “Official Records” of the association Florida Statute §720.303(4), lists the official records that an association is required to maintain for a period of seven (7) years. The developer is also under this duty and should have these documents in its possession. I have enclosed for your review a copy of this statute.

***2013 Florida Legislative Amendments

F.S.§ 720.303 (6)(d) Budgets. If a homeowner association developer elects to maintain a reserve account for the HOA, the developer’s budget must designate the particular purpose or use of the funds. The underlined portion below is the amended text of F.S.§ 720.303 (6)(d):

(d) An association is deemed to have provided for reserve accounts if reserve accounts have been initially established by the developer or if the membership of the association affirmatively elects to provide for reserves. If reserve accounts are established by the developer, the budget must designate the components for which the reserve accounts may be used. If reserve accounts are not initially provided by the developer, the membership of the association may elect to do so upon the affirmative approval of a majority of the total voting interests of the association. . .

F.S. § 720.307 Transition of association control in a community —Added to the threshold for an “automatic transition” to member control are a developer’s abandonment of its assessment, maintenance or construction responsibilities or if the developer files for Chapter 7 bankruptcy, enters receivership or loses title to a common area through a foreclosure. The underlined portion below is the amended text of F.S. § 720.307:

720.307 Transition of association control in a community.—

With respect to homeowners’ associations:

(1) Members other than the developer are entitled to elect at least a majority of the members of the board of directors of the homeowners’ association when the earlier of the following events occurs:

. . .

c) Upon the developer abandoning or deserting its responsibility to maintain and complete the amenities or infrastructure as disclosed in the governing documents. There is a rebuttable presumption that the developer has abandoned and deserted the property if the developer has unpaid assessments or guaranteed amounts under s. 720.308 for a period of more than 2 years;

(d) Upon the developer filing a petition seeking protection under chapter 7 of the federal Bankruptcy Code;

(e) Upon the developer losing title to the property through a foreclosure action or the transfer of a deed in lieu of foreclosure, unless the successor owner has accepted an assignment of developer rights and responsibilities first arising after the date of such assignment; or

(f) Upon a receiver for the developer being appointed by a circuit court and not being discharged within 30 days after such appointment, unless the court determines within 30 days after such appointment that transfer of control would be detrimental to the association or its members.

F.S. § 720.307 Pre-transition Board of Directors. The amendment to F.S. §720.307 also lowered the threshold for a member to serve as a director on the pre-transition Board of Directors. Members, other than the developer, are allowed to elect at least one non-developer related member to the pre-transition Board of Directors if 50% of the parcels in all phases have been conveyed to the members.

F.S. § 720.3075 Prohibited clauses in association documents–Developers. At any point pre-transition of control (not the 90% conveyed mark) a developer’s unilateral amendment to the Governing Documents will be subject to scrutiny as to its reasonableness. No longer considered reasonable or allowable are “ . . .amendments to the governing documents that are arbitrary, capricious, or in bad faith; destroy the general plan of development; prejudice the rights of existing nondeveloper members to use and enjoy the benefits of common property; or materially shift economic burdens from the developer to the existing nondeveloper members.”

The above list is not exhaustive; however, by beginning to request these items the association will be in a better position as the transition progresses. Additionally, it is recommended the association accept the transition of the developer via the resignation of developer members of the Board and then placement of owner member directors after an election. At that time, developers often request the association sign a release. By signing a release the association will waive any and all rights that it might have to claims for construction defects and/or misappropriation of funds. As such, the association should have the transition of control occur and then retain the services of an accountant, an attorney and an engineer. These professionals will perform what is commonly known as “due diligence”. Without hiring these professionals there is no way the association can truly know whether or not they are aware of every issue that remains outstanding, or liability incurred by the developer, that is now an association liability.

Certain times the above referenced reports issued by these professionals have minor problems that are easily settled with the developer. Other times, there are hidden problems that would have surely gone unnoticed if it were not for the diligent work of these professionals. Either way, the association’s Board of Directors has a fiduciary duty to its members and should in the very least understand the present state of the association before signing a release with the developer.

After the reports from the professionals are returned to the association, the Board of Directors should attempt to informally negotiate with the developer for any repairs or funds they believe are owed. This informal approach should involve keeping the association’s counsel informed as to its status and, if necessary, the review of documents. If the association is successful in its negotiations, the attorney for the association, as well as that of the developer, can draft the final documents. If the negotiations are not successful, the attorney for the association should still attempt to settle the matter with the developer’s attorney with a set time period for completion. It is always better to try and settle for a fair amount then filing a lawsuit. However, sometimes it is unavoidable and a lawsuit is necessary

Medically Necessary Pets

Posted on June 13, 2010 by Gerstin

“Medically Necessary” Pets in Florida’s Pet Restricted Condo and Homeowner Associations

There are a growing number of advocates who feel community association pet restrictions should be illegal. These groups have internet sites complete with “sample doctor’s notes” for use by those who want to get around pet restrictions they agreed to when they bought into their community association. Pet owners have been submitting “Medically Necessary” prescriptions for their pets in large numbers. Owners that purchased in the communities that promised through their Governing Documents to restrict pets, are threatening to sue. Wanting to do the right thing and fearful of intervention by a governmental agency or a lawsuit from both the pet owner(s) and their neighbors, Board members are starting to learn the ins and outs of this potential minefield to better serve all of the people involved.

Legal Background:

Although many people cite the Americans with Disabilities Act (“ADA”) as the basis for their “anti?pet restriction” position, the ADA does not apply to community associations because they are not places of public accommodation. The law that does apply to Florida’s community associations is the Federal Fair Housing Amendments Act of 1988 (“Act”). This law prohibits discrimination on the basis of a “handicap”, which is broadly defined in the law to include most physical or mental maladies that impair a major life function. Florida has adopted the Act; therefore, references made to other Federal Court decisions from other states are binding on Florida. The Florida Committee on Human Relations and the Federal Department of Housing and Urban Development (“HUD”) enforce the Act.

The Act requires the association to make reasonable accommodations for disabled people to fully enjoy their premises. Such reasonable accommodations include, without a doubt, an association issuing a waiver of its pet restrictions. Recently, HUD updated (and although they deny it, I believe expanded) its regulations relating to the Act and animals that provide medically necessary support for their owner’s disabilities. Following are excerpts from public comments made by HUD in their public analysis of their updates to the ACT:

Under both the Fair Housing Act and Section 504, in order for a requested accommodation to qualify as a reasonable accommodation, the requester must have a disability, and the accommodation must be necessary to afford a person with a disability an equal opportunity to use and enjoy a dwelling. To show that a requested accommodation may be necessary, there must be an identifiable relationship, or nexus, between the requested accommodation and the person’s disability. Thus, in the case of assistance/service animals, an individual with a disability must demonstrate a nexus between his or her disability and the function the service animal provides. The Department’s position has been that animals necessary as a reasonable accommodation do not necessarily need to have specialized training. Some animals perform tasks that require training, and others provide assistance that does not require training. (Emphasis added).

Housing providers are entitled to verify the existence of the disability, and the need for the accommodation—if either is not readily apparent. Accordingly, persons who are seeking a reasonable accommodation for an emotional support animal may be required to provide documentation from a physician, psychiatrist, social worker, or other mental health professional that the animal provides support that alleviates at least one of the identified symptoms or effects of the existing disability. (Emphasis added).. . .in order to qualify as a reasonable accommodation, the requester must have a disability, and there must be a relationship between the requested accommodation and that person’s disability. For example, the person with a disability who is requesting the assistance animal must demonstrate a disability–related need for the animal, such as service, or assistance, performing tasks for the benefit of a person with a disability, or providing emotional support that alleviates one or more identified symptoms or effects of a person’s disability. Examples of disability–related functions, include, but are not limited to, guiding individuals who are blind or have low vision, alerting individuals who are deaf or hard of hearing to sounds, providing rescue assistance, pulling a wheelchair, fetching items, alerting persons to impending seizures, or providing emotional support to persons with disabilities who have a disability–related need for such support. (Emphasis added). Based on the above guidance from HUD “each case brought to the association should be a fact–intensive, case specific determination”. Janush v. Charities Hous. Dev. Corp., 159 F. Supp. 2d 1133 (N.D. Cal. 2000); Majors v. Hous. Auth. of the County of DeKalb, Ga., 652 F.2d 454, 457– 58(5th Cir. 1981). Please note, in conducting an analysis of a possible waiver, the Board cannot share an owner’s submitted medical information to the members at large. Further, other than stating a waiver for “medical necessity” was granted, the Board should not discuss an owner’s condition with the members. Further, all evidence submitted by an owner should be kept in a separate file marked CONFIDENTIAL” and should not be released pursuant to any record requests from an owner. Violations can result in both State and Federal lawsuits.

Based on the above guidance from HUD “each case brought to the association should be a fact? intensive, case specific determination”. Janush v. Charities Hous. Dev. Corp., 159 F. Supp. 2d 1133 (N.D. Cal. 2000); Majors v. Hous. Auth. of the County of DeKalb, Ga., 652 F.2d 454, 457?58 (5th Cir. 1981). The Board’s duty of establishing that a “support animal” is necessary for an owner to use and enjoy their residence is critical. Courts have consistently held that an owner requesting an emotional support animal as a reasonable accommodation must demonstrate a relationship between his or her ability to function and the companionship of the animal. See, e.g., Majors v. Housing Authority of the County of Dekalb, 652 F.2d 454 (5th Cir. 1981); Housing Authority of the City of New London v. Tarrant, 1997 Conn.

Super. LEXIS 120 (Conn. Super. Ct. Jan. 14, 1997); Whittier Terrace v. Hampshire, 532 N.E.2d 712 (Mass. App. Ct. 1989); Durkee v. Staszak, 636 N.Y.S.2d 880 (N.Y.App.Div. 1996); Crossroads Apartments v. LeBoo, 578 N.Y.S.2d 1004 (City Court of Rochester, N.Y. 1991).

Conclusion:

Each case has to be reviewed by the Board on its own merits based upon submissions from the owner and the owner’s doctor or similar professional. In conducting an analysis of a possible waiver of pet restrictions, the Board cannot share an owner’s submitted medical information to the members at large. Further, other than stating a waiver for “medical necessity” was granted, the Board should not discuss an owner’s condition with the members. Further, all evidence submitted by an owner should be kept in a separate file marked CONFIDENTIAL” and should not be released pursuant to any record requests from an owner. Violations can result in both State and Federal lawsuits.

Although a fool proof method to avoid being sued or upsetting at least one group of owners does not exist. Understanding the requirements and working with your community’s attorney for each owner submission will go a very long way in keeping the board out of the dog house!