Alan E. Tannenbaum, Board Certified in Construction Law, is the Managing Partner of Tannenbaum Scro Lemole & Kleinberg’s construction and litigation sections. Mr. Tannenbaum received his undergraduate degree with honors from the University of Miami in 1975 and his juris doctorate from Florida State University in 1978.

What is the appropriate role for a Transition Committee?

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While a Condominium or HOA deed-restricted community is in its sales period, the developer will control the operation of the governing condominium association or HOA by appointing the majority members of the Board of Directors of the Association. Often, either through the impetus of the developer, or organically through the efforts of interested owners, a transition committee of owners will be formed during developer control to begin preparations for the takeover of association control by the unit/lot owners.

Motivating the Developer to Meet its Turnover Obligations

With a recalcitrant developer, sometimes it is the role of the transition committee to remind the developer of its turnover obligations both as far as the timing of turnover and the documentation which is required to be turned over by the developer at the time of transition.

Information Gathering

The primary role of a transition is information gathering. This can be from various sources. Under both the Florida Condominium (Chap. 718) and Homeowner Association (Chap. 720) Acts, unit or lot owners are entitled to request and inspect a myriad of association documents including contracts, financial information, and board and association minutes. Documents and records pertaining to the community can also be accessed. These would include the development order for the community on file with the municipality or county involved, building department records and correspondence, and records retained by the applicable water management district.

Interaction with Governmental/Regulatory Authorities

The pre-transition period is an appropriate time for a transition committee to introduce itself to county/city and other regulatory officials. Often there is a completion bond placed by the developer with the county or city. The transition committee is in the position to educate local officials on what requirements have not been met by the developer in order to justify the release of the bond and to embolden local officials to condition the release of the bond on the completion of these requirements. For water management districts, there are sometimes compliance issues which the developer may have failed to address which the district can be reminded of in the hope that the district will push for compliance while the developer remains in control.

Condition Inspections

The transition committee can inspect the common areas of the property and provide a list of construction concerns and more to the developer. If such a list is provided, it should be made clear that it was compiled without the assistance of third-party experts and is not intended to be all-inclusive. The developer is free to undertake the repair of items on the list. The transition committee, however, should not in any way be representing that it is "signing off" on any of the repairs, as it lacks the authority to do so.

Promoting a Slate of Candidates for the Initial Owner-Controlled Board

Because the transition committee has put in the "sweat equity" to discover and understand the challenges which will need to be confronted by the owner-controlled board upon transition, it makes sense that the transition committee should run and promote a slate of candidates for the owner-controlled board upon transition.

What the Transition Committee Should Not Do

The transition committee does not have the authority to settle anything with the developer. It should avoid "signing off" on any lists of repairs/actions by the developer, or purporting to bind the unit or lot owners in any way. The committee is a voluntary group of owners with no recognized authority and in its communications with the developer and others the committee should reiterate this.

Conclusion

A transition committee can serve a valuable purpose in reminding the developer of its obligations, preparing the community for transition, and empowering governmental and regulatory officials in holding the developer to account. The committee, however, should scrupulously avoiding overstepping its authority or purporting to approve any proposals put forth by the developer. 

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No more excuses, North Port code hearings resume Thursday

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NORTH PORT — The coronavirus excuse may no longer work.

North Port this Thursday resumes its code enforcement hearings, a court-like setting for those breaking, ignoring or contesting ordinance rules.

Code enforcement was interrupted in March, then slowly restored over COVID-19's smackdown that closed city hall and suspended many such services.

North Port's last code enforcement hearing in February was highlighted by a woman ticketed for letting her chickens roam the neighborhood. She won that case.

Thursday's hearing at city hall, however, has pages of backlogged code violations in some stage of resolution. Violators face Hearing Officer James E. Toale, a Sarasota real estate lawyer. His job as judge balances North Port's rules versus people's rights. Hearings in normal circumstances run on fourth Thursdays, 10 months of the year.

Toale's looking at nine pages of cases when things get rolling at 9 a.m.

The ultimate goal is correcting code violations, said Kevin Raducci, the Code Enforcement division's manager. He has four city inspectors, one vacancy.

"The last thing we want to do is take (violators) to court. We're not about fining … rather fixing, trying to work with people."

There's plenty happening Thursday. For instance, one man was ticketed for an unlicensed gym in his garage, others for cutting trees without permits, not cool in North Port, a Tree City USA town.

And others are cited for junked stuff laying about their property — tarps, mattresses, paint cans, busted furniture, pool supplies, plastic jugs and a pit with half-burned trash — illegally parked cars, trucks and a forklift, missing address numbers, other miscellaneous code violations.

Those who don't comply are given property liens or fines, all others returned to good standing.

Inspectors will get complaints or tips, but they work a beat and understand city codes, Raducci said. He rotates routes to keep things fresh. The inspectors first issue courtesy notices and tips for correcting violations. The violator has five days to respond, time to comply.

Penalty fines escalate quickly for those skirting the rules, however.

The inspectors also respect your rights. They're not allowed, for example, to peer over your fence, but may look through one. The may also view your place from neighboring property.

Inspectors are badged, wear a name tag, a black pullover with the city's logo on it and they drive a North Port Neighborhood Development vehicle. Anyone with less gear or demanding payment should get a door slam and be reported, Raducci said.

Click here to read the full North Port Sun article

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Condo and HOA Turnover – It’s Like Purchasing a Business Except . . .

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 Typical Due Diligence in Purchasing a Business

If you ever been involved in purchasing a business, you likely know of the concept of "due diligence." If there is physical plant or inventory involved, you would be foolhardy if you didn't inspect the property, equipment and inventory. Certainly nobody would buy an ongoing business without looking at the books, and going over the numbers with their accountants. Then, of course, once there was a level of comfort with the physical plant, equipment and the books (and, of course, the purchase price and terms), you would take the deal to your lawyer and have your lawyer draw up a purchase and sale agreement with appropriate representations by the seller as to the accuracy of the information provided.

Consider that the transition of a developer-controlled condominium association or HOA is in many ways akin to the purchase by the unit or lot owners of a business, often times a very big business.
There is physical plant transferred certainly. Assets, financial records and audits are supplied. The incoming Board of Directors is responsible for all of the duties and responsibilities for operation that the exiting Board was responsible. What's the difference? Little due diligence.

Sure, the owners may have had a seat on the developer Board. But for most developments, that lone owner representative was left out of the loop on pertinent information and was outvoted on the key decisions regarding operation. Individual owners may have requested information as they were entitled to by Chapters 718 or 720, but most often complete information was not provided. As far as engineering or accounting review, rarely do transition committees raise money voluntarily to secure engineering or accounting studies pre-transition. As far as legal, some counsel advise transition committees gratis, but primarily the advice concerns how the transition process is supposed to work.

Typical Due Diligence in Taking Over Control of a Condo Association or HOA

The reality for newly transitioned condominium associations and HOAs is that the new Board has limited information upon purchase ("transition") about this business ("community") it now has the responsibility to operate. It is not too late for "due diligence" however. The incoming unit or lot owner Board of Directors by statute (Chapters 718 and 720) has a fiduciary duty to the owners. To meet this duty, consider that it is incumbent upon the incoming Board of Directors to perform after purchase (transition) the due diligence that in a commercial setting would have been done pre-purchase.

It is in the context of "due diligence" that forensic engineering and accounting investigations should be ordered, general counsel retained to assist in getting operations and compliance in order, and turnover counsel retained to assist in the choice of the forensic engineering and accounting firms, determining the scope of the investigations, and pursuing relief from the seller ("developer").

Can Due Diligence Wait?

Can the due diligence wait, after all we the incoming Board of Directors has a lot on its plate the first year without having to spend time and money "looking under the hood?" The simple answer is that it really can't wait. First, with repair and maintenance of the common property being the foremost obligation of the association, a timely engineering study is an essential tool for the Board to perform its oversight, planning and budgetary functions on repair and maintenance. Second, warranty periods and statutes of limitation affecting potential claims may be at risk of expiring. For condos, the main developer warranty is tied for projects with buildings more than three years old to discovery of defects within one year of turnover.

Summary

Condominiums and deed-restricted developments are big businesses, sometimes multi-million dollar businesses. By statutory and documentary design, until sale ("transition"), the seller ("developer") holds all of the cards. It is only in the period after sale ("post-transition") can the incoming Board of Directors take steps to ascertain the cards the owners have been dealt. This is after-the-fact due diligence, but given this design, the Legislature and the courts have provided associations with recourse if the developer has left the community with deficits, be they infrastructure, regulatory, building or financial.

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The Conundrum of Aging Florida Condominiums — Repair or Abandon?

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In the early 80's, Robert Crain, a well-known engineer in the condo construction defect world, was asked by HUD to opine on the anticipated useful life of condominium buildings built in Florida. His conclusion was 50 years. Especially for a number of beach-front condos built in the 1970's, engineer Crain seems to have predicted well.

The definition of useful life that I will use for purposes of this article is the point where the cost of trying to rehabilitate a structure becomes excessive making demo and reconstruction, or even abandonment, the better business decision.

The challenge with Florida condo buildings reaching the end of their useful lives is that condo associations are highly regulated, and boards and management in dealing with aging buildings are constrained under both statute and declarations of condominium.

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Some Community Association Board Actions Cannot Wait for the Virus Crisis to be Over (VIDEO)

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 We have all been told during this Coronavirus crisis to remain in place and not congregate. As a consequence, Florida condo and HOA boards and committees are not holding in-person meetings. Some have declared a moratorium on even teleconferenced meetings, putting association operations in a holding pattern. The challenge is that some board actions cannot wait.

Board-certified construction lawyer Alan Tannenbaum of Tannenbaum Scro, P.L. warns of the risks of non-action by the board on matters which just cannot wait.

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The Challenge of Aging Florida Condominiums

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In the early 80's, Robert Crain, a well-known engineer in the condo construction defect world, was asked by HUD to opine on the anticipated useful life of condominium buildings built in Florida. His conclusion was 50 years. Especially for a number of beachfront condos built in the 1970's, engineer Crain seems to have predicted well.

The definition of useful life that I will use for purposes of this article is the point where the cost of trying to rehabilitate a structure becomes excessive making demo and reconstruction, or even abandonment, the better business decision. The challenge with Florida condo buildings reaching the end of their useful lives is that condo associations are highly regulated, and boards and management in dealing with aging buildings are constrained under both statute and declarations of condominium.

The Duty to Repair

Pursuant to §718.113 (1), Fla. Stat., "[m]aintenance of the common elements [of a condominium] is the responsibility of the association. Declarations of condominium similarly oblige associations through their boards to repair and maintain the common elements.

An association's shirking of its maintenance responsibility could invite a suit by an owner, pursuant to §718.303, Fla. Stat., seeking a mandatory injunction to require necessary common element repairs, a monetary award for resulting damages, and an award of attorney's fees and costs. Both a mandatory injunction requiring repair, and monetary damages awarded to a unit owner against an association, were affirmed on appeal by the Third DCA in Coronado Condominium Association, Inc. v. Scher, 533 So. 2d. 295 (1988).

Deterioration Constituting a Material Alteration

Pursuant to §718.113 (2)(a), Fla. Stat., ". . . there shall be no material alteration of . . . the common elements" without the requisite vote of the membership as provided in the declaration of condominium, or by a vote of 75% of the membership if no percentage is set forth in the documents.

Have common elements deteriorated by years of wear, insect infestation, hurricane damage, etc., and not rehabilitated by the association back to their original condition, been materially altered as defined in §718.113(2)(a), Fla. Stat.? So thought one Tampa federal district judge sitting in an appellate capacity in In re Colony Beach & Tennis Club Association, Inc., 456 B.R. 545 (2011).

The Colony Beach & Tennis Club ("The Colony") was (it has been torn down by order of the Town of Longboat Key) a 237-unit hotel condominium on Longboat Key. (The Colony as a footnote to history was set to accommodate President George W. Bush and his entourage the evening of 9/11.) Per the documents, control of the use of units was delegated to a management entity which ran the hotel operation. The unit owners were limited partners in the management entity, and were entitled to the use of their unit for one month a year. The condo association was obliged by the documents to maintain and repair the common elements.

The Colony operated successfully until 2006. The problem was that most of the buildings were townhouses of wood construction, and no reserves had been collected during the 30-year life of the property. In 2006, the management entity requested that the association pass a $50,000 per unit special assessment to rehabilitate the common elements and the unit interiors. The board of the association, and many of the owners, believed that the management entity should share a portion of the rehabilitation cost. The parties reached an impasse.

By 2010, the structures had deteriorated to the point where they were no longer habitable. The management entity filed for bankruptcy, and in those proceedings brought a claim against the association seeking $23 million for its loss of profits from the hotel operation. The management entity's main argument was that the association had failed to meet its repair obligations under statute and the declaration. The bankruptcy judge found that the association had no legal obligation to the management entity to undertake the repairs.

In reversing the bankruptcy court, Federal District Court Judge Steven Merryday applied Coronado and found that the association indeed had an obligation to undertake the repairs, and its failure to do so was the proximate cause of the management entity's losses. But Judge Merryday independently found that the abandonment of repairs by the association also represented a material alteration of the common elements:

Further, by allowing the Colony to deteriorate, the Board and the majority of the members impermissibly altered the common elements to the detriment of a minority of the members…The Condominium Act requires that "no material alteration…to the common elements [occur] except in a manner provided in the declaration…" Fla. Stat. §718.113(2)(a). "The purpose of [this] provision [is] to protect the [unit] purchaser against unanticipated changes in the common elements which could dramatically affect the cost and enjoyment associated with owning a condominium." Wellington Prop. Mgmt. v. Parc Corniche Condo.Ass'n, Inc., 755 So.2d 824, 826 (Fla. 5th DCA 2000). Deterioration of the common elements is an "alteration" and a "change" against which the Condominium Act protects the members who favor repairing the common elements.
Id. at 563.
 

Deterioration Affecting Insurability

Pursuant to Florida Statute §718.111(11)(a), a condo association is required to insure the common elements for the "replacement cost of the insured property as determined by an independent insurance appraisal or update of a prior appraisal." "Replacement cost coverage" means coverage for the full cost of repairing and/or replacing damaged property without deduction for depreciation. Most declarations also make it mandatory that the association secure adequate insurance coverage for the common elements.

It is typical upon renewal for property insurance for carriers to inspect the property and require repairs as a condition of renewal. Applications for new coverage or renewal also carry an affirmative obligation on the insured to report any conditions at the property which would create enhanced risk for the carrier. The failure of associations to rehabilitate aging buildings can lead to the rejection of coverage, or denial of a claim due to non-disclosure of known defects in the buildings at time of application.

The Fact that Rehabilitation is Costly is No Excuse

Many older associations lack adequate reserves. Deferred maintenance may have also been neglected. Then, major damage may be discovered, sometimes when a new owner is renovating a unit. The board then conducts an engineering investigation and gets the bad news that major and very costly work is required. Often, when repairs begin and the building is opened up, the full extent of the problems are revealed and the cost to rehabilitate the buildings correctly becomes exorbitant.

Boards then often try to get away with a scaled-down project which merely "puts the thumb in the proverbial dike." Based upon the statutory mandate, the language of most declarations and established case law, this won't cut it. So, for boards to be compliant, it's either pass a special assessment that may be tens of thousands of dollars a unit, or consider termination.

Voluntary Termination as an Alternative to Major Repairs

The author is aware of an older condominium in Tampa where the units sold for $35,000 to $75,000, there had been little deferred maintenance performed, reserves were woefully inadequate and necessary repairs were to cost $30,000 a unit, a figure that most of the owners could not afford. At the same time, the land upon which the condominium sat was very valuable, like $300,000 a unit valuable. The Board took a serious look at termination as an alternative to trying to collect a huge special assessment.

Although termination may be an attractive alternative under these circumstances, voluntary termination is not easy to achieve. Voluntary termination of a condominium in Florida is governed by §718.117, Fla. Stat. It is not the author's intent in this article to unwind what is a very complex statute, rather it is to focus on the elements of the statute which render termination quite difficult and expensive to achieve. These are the major challenges in successfully initiating and completing a voluntary termination under §718.117, Fla. Stat.

  1. A detailed, formal plan of termination must be created by the Board;
  2. A high percentage of the membership must vote to terminate;
  3. In an optional termination, which is the alternative that most groups would be limited to, 5% of the membership can block the termination;
  4. Mortgage holders can object to the plan under certain circumstances;
  5. The proposed allocation of proceeds of the sale of the condominium property is subject to legal challenge by any owner, which could tie up the termination for years;
  6. There are multiple layers of costs which must be paid before the proceeds are distributed to the owners; and
  7. The association is not excused from its repair obligations while termination is attempted.

As far as the Tampa group mentioned above, despite it being painfully obvious that termination was the far more logical solution to the association's predicament, more than 5% of the membership made it clear that they would block the termination, so it never got off the ground.

Involuntary Termination

There is a little known, short provision of the Florida Condominium Act which provides for the possibility of the involuntary termination of a condominium.

"718.118 Equitable relief.—In the event of substantial damage to or destruction of all or a substantial part of the condominium property, and if the property is not repaired, reconstructed, or rebuilt within a reasonable period of time, any unit owner may petition a court for equitable relief, which may include a termination of the condominium and a partition."

At first glance, it would appear that the statute was intended to cover board inaction in the wake of damage from a catastrophic weather event or fire. However, the possibility certainly exists that a creative unit owner could try to utilize the statute to seek the involuntary termination of a condominium where the condo buildings had been "damaged" as a result of long–term wear and tear, and there was a sufficient minority of the membership who would not support voluntary termination. Such was the case with The Colony.

A developer purchased a portion of The Colony which was the subject of a recreational lease. The developer then purchased several units, creating standing for itself as a unit owner aggrieved by board non-action on repairs. The developer proceeded to bring an action under §718.118, Fla. Stat. seeking involuntary termination. Unicorp Colony Units, LLC v. Colony Beach & Tennis Club Association, Inc. et al, Case No. 2018-CA-000360, Circuit Court for Sarasota County. All unit owners opposed to voluntary termination were sued.

The trial court in the Unicorp Colony Units, LLC action has ruled that the statute does apply to long-term wear and tear, and terminated the condominium. The battle presently is by what method the condominium property will be sold, how the rights of the contesting owners will be protected, and whether the other protections of §718.117, Fla. Stat., including the right to contest the net proceed distribution plan, will be adopted by the trial court.

Conclusion

Something has to give, as the challenges for aging condominium will only increase as the buildings continue to deteriorate. Associations administering older condominiums face significant risks by not either taking on major rehabilitation projects, or leading an effort to terminate. Of course, since repair obligations continue during what may be a lengthy termination effort, scrapping necessary repair efforts in deference to termination carries its own risks. Will municipalities and counties be asked to step in, as the Town of Longboat Key was with The Colony, to condemn buildings to get associations out of the repair dilemma while termination is attempted? Will more developers and speculators purchase units in bulk in older condominiums sitting on valuable property and follow Unicorp Colony Unit, LLC's lead in seeking involuntary termination in order to gain ultimate ownership of the underlying property? It should prove to be an interesting ride.

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Communication from the law firm representing the home homeowners impacted by the Elk Ridge Custom Homes Mass Default in North Port

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The meeting of creditors is administered by the bankruptcy trustee appointed by the Bankruptcy Court. The trustees are lawyers appointed by the Court. At the meeting of creditors, the trustee will inquire about the asset picture of the company. Thereafter, homeowner victims, and subcontractors and suppliers if they are due money, have the opportunity to ask follow up questions regarding assets. Some trustees will give latitude to victims to use the meeting of creditors as a venting session. It is not a requirement that victims attend. Their non-attendance will not prejudice them in making a claim in bankruptcy.

It is doubtful that homeowner victims will get much if any relief in the bankruptcy proceeding. Where they may find relief is with the State Homeowners Construction Industry Recovery Fund. However, the Recovery Fund statute has its peculiarities. First, the homeowner has to attest to their intent to live in the home being constructed for more than six months a year. Second, the homeowner must first either secure a judgment in circuit court and be unable to collect it or pursue a bankruptcy claim to finality. Third, the amount awardable to an individual homeowner is capped at $50,000. Fourth, the amount awardable in gross for a particular homebuilder is capped at $500,000. Fifth, the Fund operates on a first-come, first-serve basis. This means if the first ten qualified claims each exceed the $50,000 cap and the $50,000 is awarded to those first ten as a result, everyone else who is a victim of that homebuilder is out of luck. Sixth, the claims' process is not easy to navigate. Seventh, when the State Fund runs low, the Fund administrators slow the processing of claims. It could take a couple of years before a qualified claim is actually awarded.

With the $500,000 per homebuilder cap under the Recovery Fund, where there is a mass default as seems to be the case here, homeowner victims by design are obliged to compete with each other to get their claims qualified ahead of each other's. This makes it impossible under normal circumstances for a law firm to take on the representation of multiple homeowner victims. Our firm has a solution to that. We have developed a program in these mass default situations for victim homeowners to move as a group and agree that whatever may be awarded to any member of the group will be shared among the group members. For a homeowner who joins the group process, our firm, on a contingency fee basis, files the bankruptcy claim for each group member and then processes the Recovery Fund claim coming out of the bankruptcy proceeding. As the recovery is awarded, our firm splits net proceeds between the group members.

For more information, homeowners can contact Michelle Colburn of our firm at 941-806-0130 or This email address is being protected from spambots. You need JavaScript enabled to view it..

This article by Alan Tannenbaum first appeared on The Scoop Radio Show, Dec. 26,2019.

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Family concerned about the thousands of dollars put into dream retirement home after company petitions for bankruptcy (VIDEO)

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Some families are raising concerns about thousands of dollars invested into homes, after a company filed for bankruptcy this month. 

SARASOTA, Fla. — Some families are raising concerns about the thousands of dollars they had invested into homes. This after a company filed for bankruptcy this month.

Court documents show Elk Ridge Custom Homes, LLC petitioned for bankruptcy in December and that notices were sent to dozens of entities and people, including in North Port and Port Charlotte.

"My husband and I, we were in the military, it's not like we made a lot of money. We were very good with saving money," said Gwen Lamuro.

She and Joel Rodriguez said they planned to move across the country to retire in Port Charlotte. They said they purchased a lot and started working with Elk Ridge Custom Homes.

"He was producing and finishing homes and that's why we went with him," said Lamuro.

They said so far, they had put in more than $30,000, but construction still wasn't started and they started sensing something wasn't right. Now, they're learning of the filing.

"My stomach just turned," said Rodriguez. "It was like a relief, OK now I know something was up."

"Now not only we're out $34,000, but we have to pay the draftsmen, we have to pay the surveyors, they have to get paid," said Lamuro.

They're not sure whether they will be able to recoup any of it but Lamuro said the company gave release to the draftsman and filed bankruptcy immediately which could help them move things forward.

Attorney Alan Tannenbaum said some of those impacted have reached out to him, including people in Charlotte County and North Port. He estimates there could be dozens of homeowners impacted.

"Not surprised," Tannenbaum said about learning of the filing. "Again, this is the fourth contractor in North Port and the Charlotte County area that was in distress. Three of them I believe have gone bankrupt. There'll be more. The problem is the sales go quicker than the companies are able to fulfill."

Tannenbaum said after going through the bankruptcy process, the Florida Homeowner's Construction Recovery Fund could offer some relief, but comes with challenges since it is limited to $500,00 for any particular builder.

Some families are raising concerns about thousands of dollars invested into homes, after a company filed for bankruptcy this month.

Click to view Haley Bull's full ABC Action News / WFTS Tampa Bay story »

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Florida Condos and HOAS: The Case for a Thorough Engineering Analysis Upon Turnover

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 I. THE CONTEXT 

A. Repair and Maintenance: The Primary Association Responsibility

The primary responsibility of Florida condominium and homeowner associations is to maintain the common elements (in the case of condos), and association-owned property and the portions of multi-family buildings over which the association has repair and maintenance responsibility (in the case of homeowner associations). By statute, both condo and HOA boards owe a fiduciary duty to the owners. That fiduciary duty, of course, extends to making wise and prudent business decisions in carrying out the association's repair and maintenance obligations.

B. Time Limitations for Potential Claims for Construction Defects

In Florida, the absolute outside date for pursuing claims for construction defects is ten years from certificate of occupancy or actual occupancy, whichever is later. However, claims must be pursued within four years of discovery. Further, for condos, statutory warranty periods extend for shorter time periods (primarily three years from certificate of occupancy for claims against contractors and material supplier and three years from certificate of occupancy or one year from turnover, whichever is later, for claims against the developer).

C. "Business Judgment Rule"

Courts will defer to the "business judgment" of condo and HOA boards in the means of undertaking repair and maintenance. In order for the "business judgment rule" to protect the board in undertaking the association's repair and maintenance function, however, the repair and maintenance decisions must be reasonable and based upon adequate investigation.

II. THE CASE

Upon turnover, the repair and maintenance responsibility is thrust upon the newly-elected board, a board that will know relatively little about how the buildings and improvements were constructed. In the case of certain features, like retention ponds, there may be pending compliance actions being pursued by a regulatory authority. The board, with scant knowledge about the makeup of the buildings and improvements, and potential regulatory compliance issues, is in no position to make informed decisions on maintenance and repair, including adopting an adequate budget. This speaks to the need for the board to secure engineering studies to bolster its knowledge base so that informed decisions can be made concerning maintenance and repair.

So, what level of examination? Merely a visual examination provides but a hint of potential fundamental problems which may exist beneath the surface. Stucco cracking may be observed, but what is cause of the cracking? If applied to a wood frame, is the metal lath not nailed properly? Is the stucco too thin? Are there underlying framing problems which are driving the stucco cracking? A new paved surface may look fine, but is the base of adequate thickness? A few roof tiles may be displaced. Is this an anomaly, or does it point to a project wide attachment issue? Only through more invasive sampling can the true cause of a visible defect be ascertained. Furthermore, there may be hidden defects which early in a building's life do not reveal themselves in any visible form.

Potential claims aside, a board, upon turnover, in order to carry out the association's repair and maintenance responsibility in a responsible fashion, should secure a thorough engineering study of all buildings (within its repair and maintenance jurisdiction) and improvements. The incidental benefit of securing such studies is that the board, working with construction counsel, can consider recourse against the developer and other parties while applicable warranties and claims remain ripe. Whereas maintenance and repair is not optional for an association, pursuing claims is optional. But whether or not pursued, it would appear to be a prudent business decision to at a minimum have potential claims identified and analyzed while there is still time to pursue them.

Click to download a PDF of this article.

This article by Alan E. Tannenbaum Esq. originally appeared in CAI South Gulf Coast quarterly Magazine, 2019.

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Attorney Alan Tannenbaum featured on local news in case against HD Custom Homes

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January 7, 2019 — Representing 20 of the homeowners left stranded by HD Custom Homes, firm principal Alan Tannenbaum discussed a key step in the case: forcing the Port Charlotte-based homebuilder into involuntary bankruptcy. Tannenbaum's interview with NBC2 investigators was live-streamed online on January 7th. You can watch the segment here.

Tannenbaum's discussion of the case was also covered in an Englewood Sun article, "HD Custom Homes may be forced into bankruptcy." 

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Construction industry group files lawsuit against St. Petersburg

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Those familiar with our law firm know that we have branch offices in St. Petersburg, Orlando and Fort Myers, in addition to our main office in Sarasota. In fact, a Florida construction industry controversy has broken out in St. Petersburg.

An industry trade association says it's illegal for the city to require contractors to hire disadvantaged workers and apprentices in order to land contracts for St. Petersburg city projects of $1 million or more.

Days ago, the Florida Gulf Coast Chapter of Associated Builders & Contractors filed a lawsuit against St. Petersburg, arguing that the worker requirements violate Florida law. The group also says the mandate discriminates against certain workers and it raises construction costs.

The city said when it adopted the law that the requirements will help more people acquire craft labor skills needed in the construction industry.

"Requiring the employment of apprentices will promote the advancement of skill sets in construction trades to improve the quality and quantity of work," the ordinance states.

Associated Builders & Contractors rejects the argument in favor of an open competition approach in which contracts are awarded solely on merit. The trade group's legal challenge is to a St. Petersburg ordinance approved in 2015 and then amended four months ago by the City Council.

One of the key sticking points in the ordinance, the trade association contends, is the requirement that at 15 percent of all work on the city projects must be performed by apprentices working for the contractor or a subcontractor.

Another sticking point requires employment of disadvantaged workers, including veterans, people who did not finish high school, those with a criminal record and people who have recently received public assistance. The ordinance also targets residents of south St. Petersburg for special consideration.

The city said the law will help to reduce the number of city residents who need public assistance.

The lawsuit requests a permanent injunction against the ordinances.

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Breach of contract lawsuit filed over South Florida project

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Most people in South Florida are familiar with the mixed-use railroad station development known as MiamiCentral. But those in other parts of the state might not be as familiar with the nine-acre complex.

MiamiCentral connects to the adjacent Government Center station that serves rail and bus lines. The complex is also to include more than three million square feet of residential space (800 apartment units), as well as retail and office space. MiamiCentral is also the focus of construction litigation involving the developer and general contractor.

General contractor Suffolk Construction Company has filed a breach of contract lawsuit against a pair of Florida East Coast Industries subsidiaries, alleging that the development group did not give the construction company an extension or increased budget despite weather delays.

Suffolk contends the companies breached their contract by refusing to boost the budget and extend the deadline for the apartment portion of the project currently being constructed above the MiamiCentral station.

A news report in a South Florida real estate industry publication said it is not clear from the complaint if the weather delays were due to Hurricane Irma. The powerful Category 5 storm wreaked havoc on South Florida and other areas back in September 2017.

The lawsuit was filed on the heels of a settlement reached in October over delays in the construction of the station component of the project. Late this past summer, Facchina Construction of Florida (the initial general contractor on the project), filed a construction lawsuit related to the office portion of the mixed-use development. 

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What do I do if a mechanic's lien has been placed on my property?

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Any big home remodeling project takes a lot of time and effort to complete. For example, if you've been remodeling your Florida vacation home's kitchen, adding high-end cabinets and countertops and new lighting and flooring, you know that often more than one contractor is involved in the process. However, one problem Florida property owners might not expect to face in a project like this is when a mechanic's lien is placed on their property.

What is a mechanic's lien?

A mechanic's lien often comes from a subcontractor, sub-subcontractor or supplier who has not been paid for their work. Homeowners end up in a bind when they already have paid a general contractor for the work, but then the general contractor doesn't pay the subcontractor or supplier. The homeowner is still responsible for ensuring payment in that case.

For most subcontractors or suppliers who didn't contract directly with a property owner, the contractor or supplier has 90 days after the last day of furnishing labor or materials for a project to file a mechanic's lien in Florida. The subcontractor or supplier also must notify a property owner 45 days after working on the project that they have not been paid.

What to do about a mechanic's lien

When filing a mechanic's lien, subcontractors or suppliers must reach a payment agreement with a homeowner within a year. If a homeowner contests the mechanic's lien, that time period shortens to 60 days.

Homeowners often find out that mechanic's liens weren't filed properly. If that's the case, generally the lien can't be enforced. If it can be enforced, the homeowner can file a lawsuit against a general contractor to recover the money the homeowner spent paying a subcontractor.

If you receive notice that a subcontractor or supplier will be filing a mechanic's lien on your property, consult an experienced construction law attorney. An attorney can help you determine if the mechanic's lien was filed properly and within the required timeline or if you should sue your general contractor. 

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Part II: Lawsuits allege construction defects in Florida condos

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As regular readers of our legal blog know, we recently wrote about the growing list of complaints about shoddy construction at One Ocean, a South Florida luxury condominium project.

A recent construction defects lawsuit says the Related Group's South Beach property developer, general contractor, three subcontractors and architect have all failed to fix serious problems in a pair of high-end condos that are covered by warranty. The suit says the defects are in four main areas: plumbing, lighting, parking and a spa.

Some observers think the One Ocean project is also turning out to be a bad investment for Related Group's CEO and chairman Jorge Pérez. The head of Related Group is trying to sell his four-bedroom penthouse but has apparently found little interest even though he slashed his initial asking price of $20 million to $11 million.

The general contractor for One Ocean said it has met its warranty obligations. The plaintiff alleges that the two combined properties purchased in 2016 for $8.3 million have unfinished interior drywall, crooked light fixtures, a spa pump that doesn't work and low water pressure in a bathroom and the kitchen.

The One Ocean Condominium Association filed a construction defects lawsuit seven months ago alleging serious and unaddressed flaws that include corroded sliding glass doors and cracks in walls, ceilings, stucco and masonry as well as defective, deteriorating balcony railings. 

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Part I: Lawsuits allege construction defects in Florida condos

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On its company website, Related Group boasts that it "is Florida's leading developer of sophisticated metropolitan living and one of the country's largest real estate conglomerates." The company notes that it has built, renovated and managed more than 90,000 condos and apartment residences.

Not everything is as rosy as Related Group claims, however. A recent construction defects lawsuit filed against the company over One Ocean, a luxury 50-unit development in South Florida, makes that plain.

The South Beach development was supposed to be a jewel in Related Group's portfolio – the company's CEO and chairman Jorge Pérez has a penthouse there. But Perez is trying to sell his four-bedroom One Ocean property and has reportedly had to slash the price by nearly half to try to generate interest in it. According to news reports, his initial asking price was $20 million, but Perez has chopped that down to $11 million.

The lawsuit accuses Related, the project's general contractor, three subcontractors and its architect of failing to address defects in a pair of condo units. The suit follows one filed seven months ago by the One Ocean Condominium Association that also alleged construction defects.

An attorney for the plaintiff in the most recent suit says Related and the general contractor have failed to fix a number of deficiencies that are covered by warranty, including plumbing problems, improperly installed lighting and a spa pump that does not work. She said parking spaces at the luxury property are also too small.

We will have more on this dispute in an upcoming post. Please check back.

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Construction defects finally repaired at Florida condo complex

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Seven years have gone by since repairs began on an upscale Florida condominium complex. But the Orlando Sentinel reports that the fixes have finally been completed at the problem-plagued Hamptons at MetroWest.

The construction defects at the condo complex racked up "millions of dollars in damage, hundreds of code violations and millions of dollars in fines from the city," the newspaper reports.

According to a recent Sentinel article, the defects at the condo complex included mold and mildew, crumbling foundations, and water damage that rotted walls and porch railings and split ceilings. Windows and sliding glass doors in the multi-colored condo units were improperly installed and nails popped out of walls.

The long list of problems was so bad that a judge declared the 700-unit facility "unfit for human habitation."

An attorney for the Hamptons says "all the repairs have been made" and the complex has been inspected and issued a certificate of compliance by the city.

The condo owners association has spent more than $22 million on the repairs, the article stated.

Back in 2010, more than half of Hamptons condos were in foreclosure and only 81 property owners actually lived at the southwest Orlando complex. Today, most of the units at the 70-acre site are occupied.

Repairs began in 2012 after the condo association had filed a construction defects lawsuit against the builders, condo converters (the complex originally consisted of high-end apartments) and other companies that had been part of the project.

The completed repairs and resurgent occupancy rate make it clear that perseverance in construction defects disputes can pay off in the long run. 

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Four real estate investing mistakes that could cost you

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Whether you found out on your own or were advised, you have information about a possibly fruitful real estate investment. You're very eager and want to get in right away so the opportunity doesn't slip through your fingers, but slow down a bit.

There are specific considerations that, if not carefully examined, could cost you in the short- and long-term.

The first is failing to do the proper research. Even if you inherently trust the initial information, investors get burnt all the time by glitz and glamour. Just because the investment is currently performing well, is it expected to do so in the future?

Also, it would be wise to adhere to the tried-and-true investing method of "buying low and selling high." Be skeptical about overpriced real estate.

The three other mistakes are as follows.

Tunnel vision
You've already made the smart money move by investing in property, don't get sucked in by one kind of real estate. Real-estate investment trusts (REIT) and crowdfunding investment opportunities could allow you to broaden your focus.

Trusting every tip you hear
Remember that friend or acquaintance that thrives on providing "sound" real state investing advice? Well, guess what? That advice isn't always sound and may only be hearsay from someone else, who heard it from another person. The telephone game can be a treacherous path when it comes to your time and money.

If the investment does sound promising, revert to doing your research before pouncing on the opportunity. If you have a pressing question or concern about a recent real estate transaction, contact a legal professional.

Ignoring or being confused by the market
Any task takes time, patience, and dedication to perform it at a high-level. That includes investing. There is a term called a "Bull Market" that refers to a robust real estate market. Don't get caught up in this. Study the market, it's ups and downs, when the market was active in the past, and when it's likely to cool so, you can invest wisely.

These and other real estate mishaps could lead to current and future financial trouble. Do your research. Diversify. Be skeptical. Know the market. 

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