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.

CONNECTED TOWNHOMES ADMINISTERED BY FLORIDA HOAs

  • News

ARGUMENT FOR AMENDING THE CCRs EARLY ON TO MAXIMIZE THE HOA's MAINTENANCE, REPAIR, AND CLAIM AUTHORITY

For decades after condos were first developed in Florida in the '60s, developers desiring to build and sell connected townhomes (duplexes, triplexes, quadruplexes, etc) declared the buildings to condominium. Under the condominium regime, typically components of connected townhomes serving more than one unit (structural elements, walls, windows, roofs, and mechanical, electrical, and plumbing elements) were declared as common elements subject to the condo association's maintenance and repair responsibility.

Condo development in Florida, of course, carries with it some detriments for developers. First, broad non-waivable warranties of construction quality benefitting unit purchasers are imposed. Second, condo developers must jump through substantial hoops in getting documentation approved by the State. Third, condo association operation during the period of developer control is highly regulated, and the regulations are enforced by a state agency with jurisdiction over condo developers and developer-controlled condo associations. Fourth, statutes of limitation on claims do not begin to run until the transition of the condo association to unit owner control.

Deed-restricted HOA communities in Florida, on the other hand, are not subject to The Florida Condominium Act. There are no statutory warranties imposed on developers. There is no requirement to submit documentation to the State. There are only limited statutory requirements for HOA operation during developer control, and there is no regulating state agency. Finally, there is no statutory provision extending the accrual of statutes of limitation until turnover of an HOA to lot owner control.

Knowing the complexities and risks of developing condos in Florida, a couple of decades back some ingenious developer came up with the idea of developing connected townhomes under an HOA regime. Since then, many communities around Florida have been developed as deed-restricted HOAs containing solely connected townhomes or connected townhomes as part of a mixed single-family home/connected townhome community.

Connected Townhomes Under an HOA Scheme – The Maintenance and Repair Dilemma

With a condo, common elements are owned by all of the unit owners as joint tenants, with the common elements maintained and repaired by the condo association. A fellow owner far afield from your building owns as much of the roof on your building as you do. In an HOA with connected townhomes, no portion of the connected townhomes is jointly owned. Each townhome owner owns their townhome in fee simple. Consequently, with a fourplex, even though the townhomes are physically connected, there are only four owners each owning solely their townhome, which includes interior and exterior components (structural elements, walls, windows, roofs, and mechanical, electrical, and plumbing elements). The owner of a townhome across the street from you owns no part of your connected townhome.

The recorded Covenants, Conditions, and Restrictions (CCRs) of an HOA community may provide the HOA some degree of maintenance and repair responsibility over its connected townhomes. There is no statutory requirement, however, that the CCRs for an HOA community require the HOA to have any maintenance and repair responsibility for the connected townhomes. What has occurred as a result is that developer lawyers have drafted HOA documents that are across the board as far as HOA maintenance and repair responsibility over connected townhomes, from no responsibility, to some responsibility, to extensive responsibility.

Where the CCRs provide little or no, or simply incomplete, HOA maintenance and repair responsibility for the common elements of connected townhomes, the connected owners are left to fend for themselves. When one side of a duplex is settling because of a foundation deficiency or sinkhole, which may impact both units, there is no mechanism for sharing the repair decisions or expense, other than seeking court relief, if the duplex owners cannot agree. What if second floor or roof framing deficiencies in a fourplex are causing roof issues or exterior stucco cracking. You likely will not be able to fix the problem with each owner addressing just the framing of their particular townhome. How are they even going to agree on how the cost of having an engineer analyze the problem is to be split? What if there is disagreement on how to repair a problem that affects more than one townhome?

Investigating Defects and Deficiencies

Under HOA CCRs, HOAs are restricted to spending HOA funds strictly on Association responsibilities. If an HOA's maintenance and repair responsibility per the CCRs is limited to the painting of the exterior walls of connected townhomes, and the stucco is cracking, arguably the stucco cracking is not within the HOA's maintenance and repair purview, and thus HOA funds are not appropriately spent on investigating the stucco cracking. The same limitation would apply to foundation and framing deficiencies, common piping and mechanical component deficiencies, termite infestation, and any manner of serious construction and design defects that could affect connected townhomes.

With the HOA being restricted in its ability to investigate common defects and deficiencies, the owners of the connected townhomes are again left to fend for themselves as far as investigating the cause of the building issues, a situation ripe for confusion and conflict.

Pursuing Responsible Parties for Defects and Deficiencies

HOA standing to pursue responsible parties for defects and deficiencies in connected townhomes is governed by the following rule of procedure adopted by The Florida Supreme Court:

Rule 1.221 - HOMEOWNERS' ASSOCIATIONS AND CONDOMINIUM ASSOCIATIONS

A homeowners' . . . association, after control of such association, is obtained by homeowners.  . . . other than the developer, may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all association members concerning matters of common interest to the members, including, but not limited to:

. . . (2) the roof or structural components of a building, or other improvements (in the case of homeowners' associations, being specifically limited to those improvements for which the association is responsible); (3) mechanical, electrical, or plumbing elements serving a property or an improvement or building (in the case of homeowners' associations, being specifically limited to those elements for which the association is responsible) . . .

Simply put, if the CCRs don't provide for HOA responsibility for maintaining a component of connected townhomes, the HOA cannot pursue responsible parties for the cost of correcting the defects and deficiencies in such component. The stucco can be cracking on the second floor of all the connected townhomes in the community caused by framing deficiencies, but unless the HOA has repair responsibility for the framing and stucco, it lacks standing to pursue responsible parties for the cost of repair.

Without HOA standing to pursue responsible parties, townhome owners are again left to fend for themselves. Could six owners of a sixplex join together in a suit to tackle common defects in their connected townhomes? Possibly, but how would they agree on sharing the cost of pursuit? Then, if a recovery is realized, how would they agree on undertaking necessary repairs, especially if the cost of the repair was greater than the net recovery?

Economy of Scale in Undertaking Maintenance and Repairs

Our firm represented a duplex community with identical shingle roofs. In the first decent windstorm after construction was completed, several shingles were dislodged or blew off across the community. Under the CCRs, the HOA had no maintenance and repair responsibility for the roofs. The Board resisted the idea of proposing an amendment to the CCRs to provide HOA responsibility for duplex roof repairs or replacement.

Without the amendment of the CCRs, each pair of duplex owners was on their own as far as contracting with roofers to replace their defective roofs. It is no mystery within the roofing field that if a roofing contractor bids on the replacement of a single duplex roof in a community that the cost of those reroofs would be significantly greater per duplex than if the same roofing contractor was asked to bid the reroof of 150 duplexes.

An HOA has significantly greater buying power than owners operating alone. Furthermore, the HOA, with professional management, supported by an engineer and construction lawyer, is in a much better position to assure that the work is done correctly and on time, with manufacturer's warranties being delivered at the end of the job.

Protecting the Aesthetics of the Community

With the HOA administering repairs to the exterior of connected townhomes, the HOA is in the position to protect the aesthetics of the community as originally conceived. Retaining one repair contractor to conduct repairs on connected townhomes across the community allows for aesthetics to be preserved.

With owners hiring their own contractors to undertake stucco repairs, window replacement, roof repairs and replacement, etc., it would be very difficult over the long term to preserve the aesthetics of the community, with no doubt a concomitant negative impact on townhome values.

Safety Concerns

With contractors hired by the HOA to undertake exterior repairs and maintenance on connected townhomes, there is a much better opportunity to protect persons and property from damage resulting from repair efforts than if individual townhome owners are inviting contractors to the community on a piecemeal basis. This is especially true where the setback between sets of connected townhomes is very tight.

The Solution

Amend the CCRs in your connected townhome community to expand the HOA's maintenance and repair responsibility to cover all of the townhome exteriors, and the common structural, mechanical, plumbing, and electrical elements of the connected townhomes. That will cure the maintenance and repair dilemma, provide economy of scale in undertaking investigation and repair, allow for the efficient and effective pursuit of responsible parties, preserve the aesthetics of the community, protect property values, and reduce risk.

What if only a portion of the community is comprised of connected townhomes? Wouldn't the amendment unfairly burden the owners of single-family homes? The solution is to amend the documents so that only the owners of the connected townhomes are burdened by the assessments necessary to repair and maintain the townhomes and to pursue relief for any defects and deficiencies therein. But what if the HOA already had maintenance and repair obligations for the roofs? Should only the expansion of the maintenance and repair responsibility be borne by the townhome owners, or all of it?

The insurance requirements in the CCRs would likely also need to be amended so that common components of the connected townhomes are insured under the Association's property and liability coverages.

What about the expansion of an HOA's maintenance and repair responsibility to cover the exterior walls, roofs, and structural components of the single-family homes in the community? If the homes are identical in configuration and construction, this could make sense for all the reasons expressed in this article. If there is a common defect and deficiency affecting all the homes, amending the documents to expand HOA maintenance and repair responsibility could make for efficient claim pursuit.

Conclusion

There were problems easily anticipatable in Florida when developers chose for their convenience to develop connected townhomes and make them all or part of a deed-restricted HOA community rather than a condominium. There has been no statutory solution proposed to correct the anomalies created. Document amendment, however, can overcome the bulk of the ills. This could even be considered for single-family homes where the homes are consistent in configuration and construction. Consult your general counsel to get the amendments customized properly for your community. Beware of time constraints for claim pursuit which may dictate expedited action on amendment passage. 

Continue reading

HOA & COA Guide to Multi-Family Re-Roofing Project

  • Video

Jon Lemole, Esq.:

Good morning everybody and thank you for joining us. This is a great panel we've got planned for you today. We're happy that, so far, we've got 176 people joining us today. That's huge. We really appreciate that and we're glad that we see a lot of return faces, so I'll take that as a compliment that we're delivering some value for you all and we hope to continue to do that. So today, we're going to talk about reroofing projects, best practices for reroofing projects and this is going to be directed at multifamily buildings, obviously, so we're not talking about single family units. Obviously, those folks typically have to take care of themselves. But if you're an association that has maintenance and repair responsibility for a building's roofs, this is going to be a really, I think and I hope, a good walkthrough of best practices that you can all take to ensure that your project goes smoothly, little risk to the association or as little risk as possible to the association and that you wind up with a completed project that's defect free and will serve your association and its buildings for a long time to come. This applies to both condos and, typically in the HOA world, town home communities.

Why is this timely? You probably are seeing a lot of activity from your insurance carriers in terms of insurance carriers staring to say it's time to reroof your buildings. We're about 15 years out from the building boom prior to the recession and so you've got a lot of buildings that are approaching or have seen 15 years and so a lot of insurance careers are starting to tell you it's time to take care of your roofs. And given what's happened recently over in south Florida, we can expect that insurance companies are going to be even more vigilant and more adamant about building maintenance. We're expecting that a lot of you are going to be dealing with these reroofing projects in the very near future.

We think that we have a lot to bring in terms of advice and best practices. Let me tell you why that is and this may be a little bit against our self-interest as a firm because we handle typically... we do a lot of work in claims, in defect claims, and so we're uniquely suited to see what goes wrong with roofing projects when they don't go right. We know where the problems can be. We've seen all of the areas where things could have been done differently and a project could have... and that could have made a difference in how a project went. Another portion of our practice is to do major repair project consulting and our call to action here today to you folks is if we do have a major roof repair project or roof replacement project, I think there's a lot of people that tend to believe that that's a run of the mill type of thing and it's just a roofing project, but there's a lot that can go wrong and certainly we would encourage you to reach out to a construction lawyer, whether it's our firm or some other firm, and consult with them on the front end because there's a lot of decisions that could be made that can mean a huge difference in the way that your project goes.

What can you do if you have, besides consulting with us or somebody else, another construction lawyer, what can you do to ensure that your project goes smoothly? You can follow the best practices that we're going to run through today. We could spend hours on this, but we're going to give you a 30,000 foot highlight, a snapshot. We're going to talk about a bunch of things today, but obviously any one of these topics we could into in significantly more detail if needed. At the end of the day, I think I want to leave everybody with is the old saying, what did Ben Franklin say? A penny saved, pound foolish. I can't remember. Something like that.

Again, the inclination for roofing projects is that this is a thing that... a kind of a routine type of maintenance project for an association and it's anything but. It's not a time to cut costs, it's a time when an association should be saying, "How do we do this right, do it right the first time, control our risk and make sure that the project is delivered on time, complete, defect free?" because this is one of the primarily defenses to your buildings from water intrusion and the possibility that you could have a poor product, a poor result, which could create a lot of other problems for your building. And as we've seen recently, those problems can multiply, spiral and create significant problems for an association.

Let's just into the subject. Where we want to start is really quickly, and I'm going to introduce Brian Tannenbaum, who's an associate with our firm. He's the next generation of Tannenbaum to be part of our firm, but what Brian is going to talk about real quick is just to remind everybody of what the source of an association's authority is in terms of mainlining and repairing and replacing roofs on your buildings. With that, we're going to have Brian take it away and just cover that real quickly, give us a primer on that subject. Take it away Brian.

Brian Tannenbaum, Esq.:

Fixing the roofs, dealing with the windows, dealing with anything that comes up. But in the context of a multifamily home or a condo, these things are regularly maintained by the association. Now, for a condo, the law comes from Florida Statute 718 chapter 718, which gives the association the responsibility for maintenance of the common elements. It doesn't give an option and there's no ambiguity. It's not vague. It says that maintenance of the common elements is the responsibility of the association. 718.108 defines the common elements as, in part, the condominium property which is not included within the unit. This can be your roof, the balconies in some cases, any part of the condominium that is outside of the unit.

On the other hand in an HOA situation, there is no statutory basis that requires the association to maintain and repair any part of the property. Where the authority comes from is the declaration, so it's important to know what the declaration says about maintenance and repair of the property. For both an HOA and a condo, the board has a fiduciary duty to the members. Because they have a fiduciary duty to the members, it's important that they undertake repairs in a timely and appropriate way so that there's no liability opened up for the association or for the board members. When looking at your documents, you need to know what kind of things is the association responsible for and when do I as a board member or a manger need to make sure that those things get done.

There's a very heavy burden on the association and the board and it's important that those things get taken care of in a timely manner so that you can avoid that liability and that you can keep your building safe and secure.

Jon Lemole, Esq.:

Okay. Thanks Brian. Just a little segway from something that Brian touched on and I want to explore a little bit further before we move on is, and this is more appropriate to HOAs and town home HOAs than condos because the condo statute is pretty clear about common elements and there's not a similar statute or similar provision in 720, it's important to look at your declarations and understand whether, not just what the declaration requires the association to do, but whether the declarations enable and provide the association with the ability to do that work capably and completely. We've run across a lot of declarations that are typically the original declarations that were drafted by a developer, which are pretty ambiguous about what the associations begin and end in regards to roof replacements or roof repairs is.

If you've got a roof project coming up, you've got a situation where you're needing to replace a roof on a town home building for example, it would be a great time to look at your declarations and ensure that you can complete the job and that you don't have some sort of limitation in the declarations which may prevent you from doing a thorough job. Let me explain what that means. We've run across provisions in declarations where the association is responsible for the roof covering, the membrane or the shingles, but what happens if the roof, if over time there's damage to the framing, to the sheathing, to the roof trusses and that's not specified in the declaration as being part of the association's repair maintenance and repair responsibility? That can create some serious problems for an association.

If you've got a project that you're thinking, that you're expecting down the road, it's time to take a look at the declarations and make sure that you can do that work and that you don't have some ambiguity in your declarations. Folks, if you're in an HOA that's coming out of transition, a perfect time to review the developer's declarations and ensure that the association can do the work that it's going to need to do in order to completely, capably and without problems, without ambiguity discharge its repair obligations. What good is it if an association can only replace shingles, but can't correct damaged sheathing? You leave that to the lot owner and that may never happen and then you're just putting shingles over a problem that's just going to continue to further deteriorate the building, so don't always assume that the declarations are going to provide the association with a clear path to do what it needs to do in order to discharge its obligation.

Alan Tannenbaum, Esq.:

It's not only might the declaration impose some limitation on what an HOA can repair, but also arguably you can spend money on investigating the issue if it's not within the association's purview. And for a newer association, obviously the problem is the association can't pursue claims for an HOA for anything it doesn't have maintenance and repair responsibility over, so there's multiple reasons that the documents should be amended beyond just the fact that it constricts the ability of the association to do a full repair.

Jon Lemole, Esq.:

Well said. Thank you, Alan. So with that, let's turn to the subject of investigation. I'm going to ask my partner, Sal Scro, to talk a little bit about what are best practices in determining what you should be doing, what the scope of a roofing project should encompass because I think a lot of times, we just tend to assume that it's just a question of we're just going to put a new roof on the building. This is a time when an association can really take a good look and see what the scope of work should really be and that may involve some need to do some investigation, maybe bring some engineers in, but I'm probably talking too much and I don't want to steal Salvatore's thunder. So Sal, turning it over to you. Talk about investigation and engineering issues.

Sal Scro, Esq.:

Hi. Good morning everyone. The first thing that we're going to talk about is understanding why your roof may need to be replaced. There's a couple reasons. The first would be it's just an old roof, it's time to replace it. That's usually easy to figure out. You have your reserves. You have your reserve studies that usually tell you what your expected useful life is and you know if it's coming to an end. You can tell by the... if you're experiencing problems with an old roof, but then you may have a roof that's not so old and it may just be a bad roof. If that's the case, there's other things you may want to do versus just having to reroof before you just go out and get somebody to do the reroof on an old roof. If you have a bad roof, you may want to do some other things.

If, for example, you're having water intrusion and it may be coming from... you may have bad stucco and I've talked about this several times, you may cracking stucco. You may have water that's coming in through your windows. Water's going to seek its level. It's going to find its way into your building. That could be... One of the sources could from the roof itself. So any time you're having troubles with a roof, the first thing, my suggestion would be is if it's a fairly new roof, if it's something that has been constructed within 10 years, then I would suggest that you contact an attorney that does this construction defect work because they can recommend you to the right person to do the investigation so that if there is a problem with the construction, then you have the right team together to address that with the potentially liable parties.

If you have just an old roof, then maybe a good roofing company, a consultant or an engineer, but also if you have... The more changes you have in a roof as far as what I'm talking about changes, if you have different directions or slopes or different roof to wall intersections, a lot of valleys where roofs come together, chimneys, then you may want to engage the services of an architecture, an engineer to give you a detailed set of specifications so that the person going to do the work knows exactly what to do to apply the materials, to limit any possibility of water intrusion. That's one of the things.

The other thing that you may want an engineer for is, for example, if you plan on changing the type of material. If you have a shingled roof and you want to put a tile roof on it, you want to put a metal roof on, any changes in material, aside from the fact that you need to get approval from associations if you're a condominium, if you're going to change that, you definitely want to engage the services of a structural engineer because the weight. That's the key, the weight is the difference. If you've ever driven by and seen a roofing project and you see all the materials stacked up on the roof, they're all in different locations and it's not to make it easier so that they don't have to walk so far, it's because if they pile them all up in one spot, they're going to collapse the roof because it just can't handle the weight so it's important that you have engaged an engineer if you're ever going to change materials.

Also, if you have a roof that is a flat roof, that's something also you may want to do some pre investigation of before you just let somebody come in and say, "WE're going to just reroof this. And hey, here's your best way to do it. We can put this material in that will cover it. We can add vents to it so it'll let water evaporate out," all these things, my suggestion would be is do some investigation, particularly with an old flat roof because you have different layers of materials under that roof. What is the condition of each of those materials as you dig down? You don't know and you won't know unless you open it up, so I would suggest bringing an engineer in, having them uncover the roof, look down there and give you a detailed set of specifications.

There's a lot of times you can look at a roof and it looks old, but as you open it up and dig down, you find there's a pool under there, there's water, and you're not going to know that, you're not going to see it unless you open up. So if you have an old flat roof, sometimes it's best just to uncover the entire roof.

Alan Tannenbaum, Esq.:

Sal, an example of that. We had one recently. It was a built up roof and the contractor came in and said, "We're going to scrap the gravel, the loose gravel off of the built up portion, and then we're going to put a new roof on top of that." Well, it turns out that underneath this built up roof was a lightweight concrete fill that they used a couple of decades ago as roof insulation and the lightweight concrete fill was water saturated. What really then needed to be done on that particular roof was it needed to be taken all the way down to the structural deck and then a new roofing system installed above the original structural deck, but there would have been no way of knowing that unless somebody did a core through the built up roof, determined that it was indeed lightweight fill under that and do some moisture testing to determine what the condition of that is because you can't put a new roof over a bad subsurface. It'll cause a lot of trouble.

Sal Scro, Esq.:

Right. And we just did a testing the other day on a roof. It was metal and then there was a flat TPO roof. It's a Thermoplastic Polyolefin or something like that is the name for it. Anyway, that roof was three or four years old and I tried to get a video to show you, but I couldn't get it to transfer from my phone, but as we did the investigation, I lifted up some of the TPO roof, the flat roof, and I could pick up the sheathing and it would crumble in my hands. This was a roof that was three or four years old, so age isn't always a factor. It's the construction is very important. Why would want detailed specifications? Again, as I stated, the more cuts you have in a roof, the more differentiation in slopes and levels, you're going to want that.

You will also want to look into the... If you're going to have an engineer and they're going to provide year old with a set of specifications, you're going to want to have somebody look at that contract with your engineer as well. Make sure that they don't have a limitation of liability just for the money that you've paid them. The contract for roof, I had a project that we represented clients on, seven multifamily buildings and their contract to do all those seven buildings for hundreds of thousands of dollars, one page. It was a one page contract. It pretty much said, "I'm going to reroof your buildings," and that was it. You want to do an investigation if you have any type of roof that has layers to it, as Alan said, as well, especially those flat roofs.

You're going to want an engineer if you're having trouble because, as I'll talk about later, you want to make sure you look at this information so that you gather your information and your evidence if you need to address it to a potentially liable party, but you also want to engage a confidence defect attorney because you do not want to destroy your evidence if you're going to do that. You want to make sure you gather it appropriately. And also, if you have bids that you're going to receive, it's nice to have a consultant or an architect or an engineer to help you weigh through those bids. They help you get through the minutia of it. And also, they can bring up things that you may not think about, down to the little things like safety requirements, access to the building during construction for your owners, daily cleanup, daily magnetic sweeps so you're not having nails all over the place.

Those are some of the things that you want to keep in mind when you're about to do a roofing project. The main thing is, is it just old and is it a simple roof or is it a flat roof or does it have a lot of cuts or are you having trouble with it? Then you need to do some investigation. We will turn that over to Alan now.

Jon Lemole, Esq.:

Let me just say one thing to followup on what Sal said before we jump into contractors. Look, there are many, many, many fine roofing contractors in Florida. This is not intended to denigrate any of them. But in my experience and I would venture to say Sal and Alan would probably share a similar experience, when we get called in to bring investigative, potentially bring claims relating to a roofing project that has gone not so well, has gone badly, a lot of times those are projects that did not involve... I mean, it's very rare that we would come across a project where an engineer or a roofing consultant was involved in investigating and setting up a scope of work. Sal is absolutely spot on when he's talking about and especially flat roofs. We've seen a lot of projects where roofers come in and basically covered over an existing roof or some existing components of a roof and a lot of times that's a problem, least of which... Most of which. I'm not sure which way that goes, but you're relying on that existing layer of what's there and is being covered over to watertight and wind resistant.

It may not be a water issue, folks, it may be a wind issue. Unless they've done some uplift testing to determine that that substrate that they're attaching their system to is secure, you may have a roof that's not entirely resistant to high winds and hurricane winds. Those are the scenarios that we typically see is an association has either fallen under the spell of a roofing contractor or it was decided that rather than spend the money to have investigation by an engineer and an engineer involved in setting the scope of work, they've gotten that scope from the roofer. The roofer has either come up with a solution that's not a complete solution and those associations have had to deal with problems further on down the road.

Again, it may be more money, but it's money well spent because the flip side of that is if you have a claim, you're going to be paying lawyers to bring claims. It's going to take a long time. You may be having to do a roofing project in the middle of that because you've got water intrusion that can't be fixed with spot emergency fixes. You may be doing two roof projects where you thought you'd only have to do one. With that, I'm going to turn it over to Alan Tannenbaum and he's going to talk about contractor selection and this is really important in determining how to get the best contractors to come and take care of your project. So thank you, Alan. Go ahead.

Alan Tannenbaum, Esq.:

Thank you. All right. The roofing contracting industry in 2021. I'll give some buyer beware tips. Number one, there are companies out there, they're not actually roofing companies, they are roof replacement marketing companies. They have very good sales people. They travel around the state. Their pricing is pretty good and they have a clause in their agreement that once you signed the contract, they can assign it to another roofing contractor and all these groups do is sign contractors up and then they shop that job to other roofing contractors and take a margin on it. Be prepared or be aware that you need to have actually a bonafide roofing contractor.

Secondly, if you have a particular manufactured system, you want to be sure that the roofing contractor you're considering is a qualified installer for that roofing manufacturer so that you in fact get a bonafide warranty on that roofing system at the end of the day. The third for a HIRA, especially where you have mechanical equipment, drains, air conditioning equipment sitting on the roof, you're not just hiring that roofing contractor, you're hiring the roofing contractor and the air conditioning subcontractor that it decides to bring in to lift up that air conditioning equipment so that the roof replacement can occur. There may be a need for a plumbing contractor to be involved to determine drain size. You may have ancillary repairs like stucco repair and so forth on mansard walls, so you need to qualify under those conditions not only the roofing contractor, but who the heck they're going to bring in under them.

Do not let your roofing contractor do plumbing and air conditioning work that's not within the purview of a roofing contractor. There's a limitation on it. There's an interesting part with permitting. The air conditioning work and plumbing work associated with a roofing replacement, it doesn't necessarily need a separate permit for the air conditioning work and the plumbing work, but what's required is that that appropriated licensed air conditioning people and plumbers actually be the ones performing that work, so qualify your contractors as to their ability to do the totality of the work. The best recommendations for roofing contractors come either from other association and managers, certainly the engineers and contractors will do it, will give recommendations also.

You need to qualify also the superintendent, the subcontractors who might be working on the job. For 40 years, I've been telling associations that you're not actually hiring a roofing company, you're hiring a superintendent and laborers that they assign to your job so you need to know who they're sending. You can get their resumes and qualify them and make sure you get one of their top superintendents coming out. There's a lot of good contractors who take an extra job that they don't have the manpower for and something usually goes wrong on the job where they've either hired a journeyman superintendent and now they're assigned to your job, so you need to qualify.

The most important thing besides third party supervision I think that contractors will always perform better when they know somebody with knowledge is watching what they're doing and you're likely to get better performance. But we go back to the fact that without clear plans and specifications, it's impossible to determine and compare bids. Like Sal said, if you got a one page agreement and it says roof replacement and you have a bid for $60,000 and another one for $80,000 and another one for $100,000, they're not even comparable because you don't know what they're going to do. You also don't know how well insured they are and you don't know if they've even paid their workers comp. There's a lot about qualifying a contractor beyond looking for the lowest number.

There are good ones out there. There are bad ones out there, but I had third category, which is contractors with a really good reputation who happen to do a bad job on your roof because of who they send out or they're too busy or they're subbing things out that they shouldn't. Keep all those considerations in mind. That's my nutshell there, Jon.

As you mentioned, one thing that's important is that the manufacturer may do inspection, but what they're looking for is just whether their particular product was installed the way it should have. They're not looking necessarily at the way the air conditioning systems were remounted. They may not be looking at the flashing. Their warranty is qualified to saying that our system was installed per our manufacturer specifications, but they don't give a totality specification generally for the entire reroofing project so you just can't count on that.

Jon Lemole, Esq.:

Yeah. To amplify something that Alan said, if you're getting multiple bids or proposals or estimates, it's so important to have on the front end a defined scope of work that was set by somebody like an engineer or a highly qualified roofing consultant, and there are some very good ones out there, because then you know that you're getting estimates that are apples to apples and that is key to making a quality choice. You know that if you're taking the least or lowest estimate out of three, they're all competing on the same playing field and they're all estimating the same scope of work. Certainly, the engineer or the consultant can be vital in helping you evaluate those estimates. 

Okay. Let's talk about contract drafting because that's kind of where the rubber hits the road in terms of as association being able to take some steps to really control its risk in this project being completed on time, being completed properly and without problems. We're going to a little bit of time here and walk through some key things that should be in any reroofing contract. We have a whole course, folks, that covers this. We could spend at least an hour, so I apologize in advance if we're going to run through it a little bit quicker. But if you want, you can, the next time we deliver the course, the in-depth course on repair contracts, key provisions in repair contracts, please join us. But I'm going to run through some of the key areas for contract drafting.

Sal brought up an interesting point. He said he's seen projects, and we all have. We've all seen projects where you got a pretty sophisticated reroofing project that's covered by a one page contract and I would venture to say a lot of you folks and managers have faced that situation too. On the other hand, we've seen the full AIA contract that's 15 pages long with its attending general conditions document. I'm not saying one is necessarily any better than the other, probably a one page contract is not going to cover all the bases, but do you need the full AIA long form contract? Probably not, depending upon the nature of your project and the size of it. The takeaway is not how many pages the contract is, the document is, whether it's an AIA document or not, as long as the document covers some very key elements, it can be the AIA form, it can be in a different format or template, but it's important to have a couple of very specific things, some key things that should be in there.

Let's talk first about careful specification of what constitutes contract documents. Okay. I've seen contracts that haven't clearly spelled out what constitutes the terms of the agreement between the association and the roofer. By that, I mean what is the scope of work, whether there are drawings that need to be followed, whether there are engineering specifications that need to be followed. The very first, and especially if you've spent the money to have an engineer involved or a roofing consultant involved, it's important that your contract document specify the engineer's specifications, the engineer's drawings if they've done some. If the roofing consultant has done specifications and drawing, that should be specified. If there's going to be a warranty involved, let's see the form of the warranty that the roofer is going to issue.

I'm not talking about the manufacturer's warranties, a lot of roofers though will provide a warranty on their workmanship. Well, let's see that warranty up front, that form. Let's make that form part of the contract so that you know going into it exactly what kind of warranty you're going to be getting when this project is completed. I've seen many a project where you're arguing over the terms of the warranty after it's too late. So if you have an engineer involved and the engineer has done a project manual, obviously you'll probably have a form contract that's going to specify everything that needs to be in there, but if you haven't gone that route, it's very, very important to make sure that the contract specifies what documents constitute the work that is to be done. That may rely on some others that need to be part of that.

The second main area that you'll want any good reroofing contract to address is the draw schedule. How is the roofer going to be paid? Let's think about a typical roofing company. Every morning, that owner or that general manager, whoever's in charge of running the day-to-day operations of that roofer, he or she wakes up in the morning and has to determine how they're going to staff the seven, eight, 10, 20 different project that they've got going at any one time. Okay. They're going to send their best folks to the project that is either giving them the most grief or has the highest amount of risk to the roofer. The best way that an association can control risk and ensure that that roofer has some continuing day-to-day risk on the project is through the draw schedule or through any of the provisions in the contract about how that roofer gets paid, progress payments.

You want to make sure that the way the roofer is paid during the progression of the job is in a way that that roofer is not... they haven't gotten their profit paid to them yet. There's a lot of different ways you can do that. I can't tell you a specific way, but typically you want to make sure that you're minimizing any deposits that you pay upfront because a lot of times the deposit is the profit. The more of the profit you pay upfront, the less that that roofer is incentivized to come and complete your project on time or in a diligent fashion.

If you can't get away from having to pay some sort of deposit, then you want to negotiate for the lowest amount of deposit or you want to redress that, if you will, that's probably not the right word, but you can maybe build in some retainage on progress payments and pull some of that back to ensure that the roofer completes on time and free of defects. The draw schedule is the best way to, one of the best ways, to ensure that every morning what that roofer is determining who he's going to send and where he's going to send them to, he's going to be looking at your association's reroofing project and saying, "I got to get this thing done because if I don't get it done, I'm in the hole. I'm negative here. I don't have my profit on this job. I'll earn my full profit on this job until I complete it." Don't ever give them a reason to get paid what they're going to ultimately make early on.

Alan Tannenbaum, Esq.:

Jon, the bottom line from my perspective is that you don't want the contractor that having paid 80% of the purchase price when only 60% of the work has been completed because it's awfully difficult to get them out at that juncture.

Jon Lemole, Esq.:

Right. Project supervision is another key area. Who for the owner is going to be responsible for day-to-day supervision of the project? I've seen many a situation where it's they've designated somebody on the board because they've had some sort of experience or because they've dealt with a roof replacement before. There may be some people on the board that are very qualified to do these things, I'm not saying that. But even if you haven't hired an engineer or a consultant to design your project, it's always worth considering having somebody come in, a third party come in and oversee and supervise the completion of the project and take a look at what the roofer is doing, inspect their work as the project progresses, somebody who's got experience in that area because that's usually one of the first... If a qualified person is doing that, they can nip problems in the butt obviously.

If the roof is not going on the right way, it's better to learn that early rather than later because later may mean a complete tear off and redo; whereas earlier may be, "Okay, we've got to take a section and redo it," and it's not a huge problem, so think about and have some provisions in your contract regarding project supervision. Subcontractors. Alan touched on this and especially in the area where you've got other things like air conditioning work that needs to be done, plumbing work that needs to be done, you want to have the ability to know who those subs are going to be that the roofer is bringing to do that work and you want to have some ability to maybe make some objections to that. So at the very least, you should negotiate or try to negotiate a provision which requires the roofer to tell you who else he's going to bring to the job and to allow you to have some opportunity to object or reject those subcontractors. Now, a lot of times you may not get away with being able to reject them, but you should know who they are.

Who determines completion? Does the roofer get to say the project is complete? And completion is a key element in a contract because that may determine final payment. You've got warranties that flow from that. It's evidence that maybe come back to haunt you if you ever have to bring a claim or the statute to repose, so substantial completion or completion of the project is a very important date to fix and should be fixed cavalierly. So are you going to let the roofer determine that or are you going to have an engineer involved who gets to make that decision or a roofing consultant who gets to make that decision? Obviously, I think you know what we would recommend.

How are in-project disputes handled? If you are unhappy with something that the roofer is doing, how are you going to handle that? Is there a mechanism for dealing with that? Are you going to have weekly progress meetings with the roofer? Are they going to do weekly inspections where you get to look at the work and have a meeting to review what's been done? All of that is key. Here's a biggie. Alan touched on this. Nonassignability. I can't tell you how many times we've seen roofing projects where you've signed a contract with somebody and you've got a completely different entity that shows up to do the work. If you picked a roofer for a reason, then make sure that that roofer isn't going to assign the contract or sub the work out to some other roofer. Those clauses are very rarely in contracts and so it's important that you take a look and make sure that you negotiate that into your contract.

The next thing is near and dear to our arts as lawyers, as litigators, because we usually end up dealing with the aftermath of a project gone bad and that's alternative dispute resolution. We'll often see contracts which require arbitration. We don't like those. Arbitration is not all it's cracked up to be in our experience. You'll hear that it's cheaper, it's faster, but, A, it's not necessarily cheaper because the cost to file a lawsuit at Circuit Court is, I don't know, I think like $405. On a couple hundred thousand or a few hundred thousand dollar roofing project, the filing fees at the American Arbitration Association may be thousands of dollars, plus you pay the arbitrator's fees hourly, so it's not necessarily cheaper.

I don't know, maybe faster, but you don't get discovery, you don't get full discovery, you don't get to take depositions under the American Arbitration Association rules, so that's a potential problem. Folks, at the end of the day, we don't recommend arbitration. Certainly in most cases, we would want to be in Circuit Court in front of a jury and so it's important to make sure that your contract doesn't require you to waive your right to a jury trial. We've seen plenty of contracts that we were not involved in negotiating and where we're now bringing a claim that have not had a prevailing party attorney's fee clause and that may be a problem. We would want a method for recovering our client's attorney's fees for bringing a claim for a roof project that was defective and so you need to take a look and see whether there are provisions in the contract for prevailing party attorney's fees.

Alan Tannenbaum, Esq.:

Very quickly, we want to answer these questions.

Jon Lemole, Esq.:

Final payment. How long do you have to do your final payment and release any retainage and under what conditions? That's essential as well.

Alan Tannenbaum, Esq.:

I want to get to some questions. Richard asked how to find a top notch engineer. We do know of some good ones. Do they perform the same in every job? Just like a contractor, sometimes you run into a glitch. If you hire an engineering firm, make sure the person they assign to you is actually one of their roofing specialists. Sometimes they have that capability sometimes not, but we can make some recommendations on that. I think, again, some other management companies and associations might know who they've had a good experience with. Barry asked a question about work that was done by an owner above the roof line. I bet that's an HOA, I hope it is. Who's responsible? Depending on how it was entered into and what your documents say, usually if an owner adds an improvement, it's on them to either remove it so that you can do a proper reroofing job or not, but the devil is always in the detail with documents.

Somebody asked a question about allowances and it's a very good question because, for instance, you may enter into a roofing job, you have a wood deck and there's an allowance per square foot or for board foot of the sheathing removal and replacement. Number one, you want to make sure that the price that the contractor's putting on replacing sheathing is a market price and they don't have an extortionate number for it. Secondly, you need to quantify how much, when it's opened up, how much wood actually needs to be pulled off the roof and how much is being pulled is being pulled off the roof because all of a sudden you get an overage of $30,000 or $50,000 at the end of the job and the wood that was removed has already gone into the dumpster and been taken away and how would you ever verify how much the contractor did, so that's a very good question and it ends up being a real problem.

Somebody, I think Mark [Spursion 00:53:49], mentioned that you also have to be careful of what type of products are going to be installed. There are different types of roofing systems. They carry different types of warranties. Definitely, your choice of roofers should also include vetting the roofing system that they're proposing to install because they are all different types of quality warranty limitations and so forth that come with the roofing project. There's one question about fiduciary responsibility. What is an HOA property management and board's responsibility to ensure proper funding of reserves under Florida statutes and case law? Well, the board has a fiduciary obligation to follow Florida statute and HOAs, there's no statutory requirement for the funding reserves. If it's in the documents, it is required.

If an HOA doesn't properly fund reserves, I doubt that that creates a case fiduciary for a fiduciary violation. It may be a poor business practice, but I don't think that it's going to create liability. So sorry, Jon, I thought we needed to get some of those questions answered.

Jon Lemole, Esq.:

Okay. That's fine. I want to make sure we answer the questions as well. That's good.

Alan Tannenbaum, Esq.:

Right. And we covered project supervision and completion, so Sal if you have something to say about construction defect claims that you can say in three minutes, the floor is yours.

Sal Scro, Esq.:

Yes, thanks for letting me have all this time. There was one question out there that was what about material failure on a fairly new roof? That kind of hits what I'm going to talk about. If you have a roof project, a new one that was done or one that went wrong or an existing roof that is wrong, what do you do? Well, you have four years statute of limitations to act on it, not to exceed 10 years and that 10 years is based upon when it's discovered. For example, if it's a latent defect, so the four years runs from either actual possession by the owner of the certificate of occupancy date, the date of completion of the project. If there's an abandonment of the project, which a lot of times leads to legal action, that would be the date that commences your statute of limitations. The date of the completion of a contract between the contractor, the architect, the engineer and their employer, so if you happen to employ the architect separately, then the time they've provided you with those details, that's your statute of limitations on that part of it. But typically, they're involved in larger projects so it's whichever is latest.

The statute of limitations runs four years. We're talking to community association managers here, so what do you do? You guys get complaints. You get complaints of problems with roofs, leaks, windows, anything like that, you document them because they usually come to you in writing. You talk about them in meetings, so you have meeting minutes. That documentation, what does that equal? That equals evidence. That equals evidence of your knowledge of a defective condition, which if you wait too long can hurt you, so it's good to document things, but you want to make sure you act upon them. For example, if you're having complaints of stucco cracks and you keep patching the stucco and patching the stucco. Later you find out that, well, it's not really the stucco, it's coming from the roof installation and the flashing, don't think that your discovery of that roof problem happened when you discovered it, it may have happened when you found the cracks in the stucco so it's going to be important that you investigate these issues by somebody competent to let you know, not just any contractor that goes out there.

If you see stucco cracks, you call a stucco contractor. He's going to tell you, "Okay, I'll fix your stucco." He's not going to talk about roofs necessarily and he's not going to uncover it, so it's important that you look for a competent investigator, an engineer, somebody to look into it. Usually, you go to the construction defect attorney first. That's what we do. We would recommend the right person for you to do that. One of you I know here today, we talked just recently about owner surveys and I use the word owner in quotes here. Should we send out written document... an email or a letter to all the owners and say, "Are you having any problems?" We recommended, again, if you want to talk to them, great, but if you're going to do these owner surveys, most of the time you're creating evidence, you're creating evidence that is going to probably not get you a lot of feedback and it's going to be more of a problem than it's worth.

I could talk about it for a while, but we don't have a lot of time so I want to touch on the 558 process. Before you commence any action to address construction defects, you have to give notice under Florida Statute 558 and it's specifically 558.004. If you're 20 units or less, you have to give that notice 60 days in advance. Tell them the potentially liable parties, what the defects are, what the damages are, give them a general idea of where the defect is located and they have 45 days to respond. It's 120 day pre suit notice for if you have 21 or more units and that is a 558 process for dummies statement there. There's a lot to it and it's important to use an attorney that knows how to handle these things appropriately to give the proper 558 out there.

Evidence preservation, exfoliation of evidence, destruction of evidence, that's very important. So when you're doing these investigations, it's always nice to have somebody martial it through. I know if we handle a destructive investigation, I make sure I notice the potentially liable parties. I tell them what's going to happen, when we're going to do this investigation. They can come out and look. They can't talk, they can't talk to the owners, they can't direct any of the investigation, it's our investigation. They can go out there and watch it and they can see what's there so they can't say we destroyed any of the evidence and the people you have out there doing it, it's documented. Sometimes this comes into question if you have emergency repairs, water coming in. Well, managers, direct somebody to take pictures before, during, after. Videos are good, but we don't want closeups. You got to start far out so we know what you're talking about.

I can't tell you how many times I get a picture of a round wet spot in ceiling that doesn't tell me anything. I need to have something back to look at to say, "This is the building. This is the street, the building, the unit number, the interior," and then you can zoom in on it. There's a lot to talk about on that, but the main thing is you have four years from discovery, not to exceed 10 years. So any of you with buildings or improvements that were done, any renovation projects that were done that are 10 years or less and you're not sure about their condition, my recommendation would be get a competent person to go out there, do a walk around, do an inspection. We know people that will go out there a lot of times and just do a free walk around if it's something that you think you're having a concern with.

If you're not having concern, obviously these engineers aren't readily available to run out there, but if that's the situation, it's always good to do. Thanks.

Jon Lemole, Esq.:

Okay. So roofs are your first line of defense to water intrusion. One of the most important components of your buildings. You've got reroof your building, the takeaway today is to follow best practices. We've laid them out for you. If you have any questions about a project that you may be contemplating undertaking, reach out to us or reach out to a construction lawyer to help walk you through what would be some of the key things to do in order to make sure that the project goes well. We thank you all for joining us today, you managers. I think Michelle will take care of getting you all of your credit reported to the DBPR. Hopefully we'll see you on our next panel, so thank you very much for joining us.

Continue reading

The Smart Board & Property Manager Legal Guide Key Rules of Evidence Preparing for Court

Alan Tannenbaum, Esq.:

My name is Alan Tannenbaum, I'm here with my partner Salvatore Scro and Jon Lemole. Tannenbaum Scro Lemole & Kleinberg. We are construction lawyers who primarily service the Community Association field and our market is from Daytona Beach across to the Tampa Bay area and down to Naples, that's where we have the bulk of our client load and what we do when HOAs and condos turnover, we assist the new boards and management in analyzing potential deficiencies both from a financial standpoint and a construction standpoint.

We negotiate resolutions with developers and contractors, sometimes in court, sometimes out of court. We also act as construction counsel when an association is undertaking a major repair project and offer consulting services and drafting contracts and in helping administer major repair projects, the bulk of where our practice lies. The setup for this particular course and Michelle Colburn will handle the CEU, if you have any questions about getting your CEU's credits Michelle, you can handle those offline.

The setup for this course is the following. So right now, all of your properties, and either your board members or managers, things are happening. There's people who are maybe tripping and falling at your property. There's owners who may be fighting with each other. Somebody this month didn't pay their assessment. There's a multitude of things that can happen at your property that-

Everybody, please mute. We're hearing some backdrop there. So all kinds of things can be happening, and what you don't know as a manager, or as a board member is which of those incidents are going to turn into a claim. Well, you might find yourself a year and a half from now, a city with a lawyer, lawyers asking you to present evidence and testimony and you say, "Gee, that happened a year and a half ago, my recollection is problematic." Or, "Which issue is that?" And, "I don't have the records and so forth."

And what this course will help do is set up procedures and set up a knowledge base so that you could do the right things today and when something happens in your property, in order to prepare for the possibility that that could be the one incident that is going to end up in court where you're going to have to present testimony and evidence. So we're going to show you some basics or teach you some basics about the Florida Evidence Code. Some of the things will surprise you and we're going to talk about business records.

We're going to talk about incident reports, things that you should be doing on an ongoing basis in the end to prepare an appropriate record for court if one of these issues ever gets there. So I'm going to ask my partner Salvatore Scro to talk first about the attorney-client privilege. Who it applies to, who could waive it so that you have a basic understanding of that.

Salvatore Scro, Esq.:

Morning everyone, good to see you again. So let's start with the lawyer-client privilege and this is important because when we deal with our clients a lot of times, the question is who can know certain things, what can be disclosed, what cannot be disclosed and who can it be disclosed? So the first thing you have to know of when dealing with a lawyer-client privilege, the attorney client privileges, who is the client?

So the client can be ... The way the statute reads if it's under the evidence code which is section 90.502. The client can be any person, it can be a public officer, a corporation, it can be the association or any other organization whether it's public or private who consults with a lawyer, and this is the key part, with the purpose of obtaining legal services, or who has rendered legal services by a lawyer.

So that part means if you're discussing the possibility of engaging a lawyer, that would be an attorney-client privilege. So what can be disclosed? And one would be is what makes the communication confidential? The key is that if it's not intended to be disclosed to a third person other than the disclosure is in further in surrendering the legal services, and also to who can it be disclosed would be those people reasonably necessary for the transmission of the communication and that a lot of times means the association managers, it could mean possibly some of the employees of the association, a lot of times we will have ... We will be asked to give a presentation to owners at an owner's meeting.

Sometimes it could be all of the owners, but it's key that that privilege ends once you insert somebody who is not entitled to that privilege, who is not necessary for the transmission of the communication or who is not there that you're servicing and rendering the legal services. So one of the other things that section 90.502 speaks about is that there's no lawyer-client privilege under this section when, and this is key, the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit what the client knew was a crime or fraud.

So do not speak to the attorneys about how to get away with something if you know that it's a crime or a fraud because you're not going to have that privilege if something turns up later on. So that's the key to the attorney-client privilege is, first, that it's for the purposes of rendering Legal Services, it's not just a discussion out at a restaurant or something like that, it has to be something that is for the exact purpose of either retaining the attorney or already under the retention by the attorney for legal services, that the disclosure is in furtherance of the rendition of those services and that only to those people who are reasonably necessary for the transmission of the communication.

Sometimes that could be also the engineers. We sometimes ask that engineers be retained through our firm so that it's more of a work product. And I'm not going to get too deep with that. But there are differences between state and federal as to what is privileged and not privileged with regard to those communications. But for the most part, that's the essence of the attorney-client privilege.

Alan Tannenbaum, Esq.:

And be careful about inadvertent waivers. We've seen some groups where we give attorney-client privilege advice, and they reproduce our opinion within the body of the minutes. We get it to litigation, the other side sticks to those minutes, and we have a battle as to whether that advice or the privilege over that advice has been waived because you've incorporated your minutes. So we generally recommend that you don't put our legal opinions or anybody's legal opinion right in your minutes where they could end up being discoverable. So Jon Lemole, talk about the account-client privilege.

Jon Lemole, Esq.:

Good morning everybody, well, that ... This is pretty easy, except in one regard because it pretty much tracks exactly what Sal just told you about the attorney-client privilege. So any conversations or communications between the client and the accountant. So in your case, it would be the association, and particularly the board of the association and its accountants would be similarly privileged. And that would extend to people who also like managers who are necessary to the communications between the client and the accountant as long as there's an intent to keep that conversation or that communication privilege.

Here's the interesting thing about the accountant-client privilege. An accountant is defined in the statute, and this is for anybody who wants to geek out on, look at the statute, Florida statute 90.5055. An accountant is defined as a certified public accountant or a public accountant. Now, we've talked about that in the office many, many times. In fact, yesterday, we were talking about it again, and none of us really understand what's the difference between a certified public accountant and a public accountant, here's the best that I can come up with.

It's not a bookkeeper. I don't think it would extend to somebody who's doing bookkeeping functions. It may not extend to somebody doing bookkeeping functions, say at the management company. A public accountant at the very least is somebody who has an accounting degree and holds themselves out with themselves out as an accountant to the public. As far as I can tell, the difference between a certified public accountant and a public accountant is that a Certified Public Accountant obviously has gone through some certification process and only a Certified Public Accountant can file reports with the Securities and Exchange Commission or can do audits of publicly traded companies.

So that normally wouldn't apply to nonprofit community associations. If you're in doubt as to whether the person who is doing your financial auditing, record keeping is somebody that would be covered by this privilege, then by all means, speak to your general counsel, and ask them and get an opinion on there. And like the attorney-client privilege, it's the clients, only the client can waive it, it has to be preserved. If the client says to the accountant, "Don't disclose that." The client and the accountant can't and the accountant always has to presumptively believe that that information can't be disclosed unless somehow waived by the client.

And also like the attorney-client privilege, it doesn't extend to communications in furtherance of a crime or, wire fraud or bank fraud or something like that. So it's not any of those communications, but the regular communications back and forth between the association and its account for audit purposes, for annual audits, for tax filings, all of that stuff is generally going to be privileged against disclosure. The association should guard that privilege zealously in minutes that are going to be available to the public.

If you have decisions that are made with regard to advice provided by your accountants, you should be very careful about how you disclose that in minutes and to the extent that you disclose those communications in minutes. And again, that's something that you can run by general counsel. Easy, right? Okay. Thank you.

Alan Tannenbaum, Esq.:

Well, again, on the criminal side, it's interesting that if you robbed a bank yesterday, you can go seek the advice of your lawyer, your accountant about what you did, that conversation is privileged. If you walk into your lawyer and accountant and say, "I'm planning on robbing a bank tomorrow." That is not a privileged communication. So the aftermath is protected, the planning is not, not that anybody in this audience is planning on that, but keep that in mind. 

I'm going to talk about the husband-wife privilege in Florida. This is not directly pertinent to a lot of management issues, except sometimes you have these husband and wife pairs who let's say manage a beachfront community, it could be a little bit chauvinistic. The pattern is usually for the wife to handle the front office and the husband would be the maintenance guy, but sometimes that's reversed.

So during the marital relationship, you can't force a husband to testify against your wife or the wife to testify against the husband. So any pillow talk, there is a privilege for that. If you get divorced, the privilege still applies to the time that you were married. So if you get divorced, and you're particularly angry at your spouse, and you want to spill the beans about something, your spouse said during the marriage, they will be able to assert a privilege to stop you from doing that.

If you're in a divorce, it's no holds barred, you're able to present any testimony in the divorce and the privilege without apply in that proceeding itself. And to use the example of the breach fund manager if the wife embezzled funds from the association, the husband didn't know anything about that. And they're both charged with a crime of embezzlement and the husband needs to testify about what the wife may have said in order to be exonerated and the charge against the husband, in that circumstance, you can bring up a privileged information. Important, it doesn't apply to common law marriage, only applies to the traditional marriage, and it has not been modernized to cover husband, husband, or wife, wife. And maybe someday the legislature will get around to it.

Right now it's called ... Well, interestingly, it probably could be interpreted to cover illegal gay marriage too, but that has not been ... I have not seen the court opinion on that one yet. So Salvador, tell us about compromise and offers to settle and subsequent remedial measures. Pertinent to the Community Association field.

Salvatore Scro, Esq.:

Okay. So we see this a lot in matters we handle in the breach of contract cases, construction defect cases, things like that where there's claims against the developers or the general counsel or the subcontractors, and there's problems with the construction. The client sometimes will say, "Well, once we start, if they offer to settle, that would not be admissible." And we hear, but they know they were wrong because they were offering to pay us money.

Well, that's really not the case, they're trying to buy their way out of it. So the statute, the applicable statute if you want to look it up is and the evidence code is 90.408 and the way the statute reads is that evidence of an offer to compromise a claim which was disputed as to validity, or amount, as well as any relevant conduct or statements made in negotiations concerning a compromise is inadmissible to prove liability or absence of liability for the claim or its value.

So the key there is that there's a disputed amount. If there is an offer to compromise, that would be something that would not be admissible to show liability, it would not be admissible to show that they owed at least a certain amount of money, or the amount of money they've proposed. You will find that this happens in personal injury cases all the time and insurance company may offer to pay, that would not be admissible.

If an insurance company offers to pay in association for some claim, that's not admissible to show liability. The facts of the situation are what are admissible to show whether or not there's liability. Along with that is Section 90.407 which is subsequent remedial measures. So if somebody slips and trips and falls, say slips and falls, I'm from New York, so we're used to ice, but down here, you're not going to find that. So if somebody trips and falls on the sidewalk, and there's some impediment to walking and the association managers send somebody out there to make some adjustment or change to the sidewalk, that is not admissible into evidence to show liability.

So somebody tripped on the sidewalk, you can see to the jury or to the judge, "Hey look, they slipped and fell on the sidewalk. They knew it was a problem because they went right out there and fixed it." That is not admissible as towards liability. What there is an exception to the rule is that subsequent remedial measures, some action they have taken would be admissible if it's offered to show evidence of something else.

So if they say, "Well, this wasn't ... I didn't own this part of the property, this wasn't mine." Well, you can offer into evidence the fact that they were out there doing some repair or some sort of remedial measure as possibly evidence of ownership, or that they had control if they were leasing that area. Something to show other than the liability of the impediment or whatever the cause was that you're attributing the negligence to.

So you do not need to be afraid to go out there if something happens on the property, you do not need to be afraid to go out there and take some sort of remedial measure. You should not be out there discussing things. You shouldn't be out there saying anything like, "Oh, I knew this was going to happen." But go out there, do your job, take care of the situation, clean it up if you need to, and you can be assured that that would not be offered into evidence has something to show liability.

Alan Tannenbaum, Esq.:

And the concept behind what Sal has just described. That society needs cases to settle, the very ... If every case made it into court, the court system would be totally overwhelmed. So there's a public benefit to people being able to make settlement offers and resolve cases. And if your settlement offers were admissible in court, people would be reticent about trying to settle. And the same thing about the remedial measures, if those were admissible, manufactured items or site deficiencies, nobody would ever get them corrected because they'd be afraid that, "Well, it's going to be an admission in court of liability."

So those really are further in some cases getting resolved, and problems being corrected. The other part of it is if somebody is injured on your property, and there's a defect in that property, you can defend that first case to say, "Well, we didn't know there was a problem, and we weren't really negligent." But if you don't get it corrected, and the second person gets hurt, they now have a record it's going to make their case a lot better. So the issue is you should get items corrected that create some potential exposure.

So let's talk about what you can say or what you should say or what you should do. And let's use a trip and fall, somebody's near your dock, and they fall through a plank that was rotted, they're in pain, they're hurt, we get there, you're the manager, you're a board member. You can ask them how they feel. You can give them ... Make them more comfortable, you can call the ambulance, you can take them to the hospital. You can sympathize or empathize with their situation and it's best to do so because it's far less likely that somebody is going to sue the association if they are treated well at the time that they have a problem or an injury.

So you can write down a note that says, "I'm sorry for what had occurred, I'm sorry for your trouble, I'm sorry for your pain." That's never going to find its way into a court of law, a judge is never going to allow that in to try to prove that, "Well, they were empathetic or sympathetic. That means they must have felt guilty, that means they must have done it." That evidence will never get before a jury because again, from a public interest point of view, we want people to be sympathetic, empathetic, help them if they're injured.

But there's a very important distinction and it says right in the statute 90.4026. The statement or writing or the gesture expressing sympathy is not admissible. But a statement of fault which is part of or in addition to any of the above shall be admissible. So you've got to be very careful. You get out there and you're a manager and you say, "Oh man, it's terrible what happened to you. Are you okay? Let me make you more comfortable." And I told that board six times that they needed to get these planks fixed or the dock worked on.

Well, all the expressions of sympathy can I help you, so on and so forth are not going to get into evidence. But your statement about what the board should have done is readily admissible as an admission. So one of the things we greatly believe in is having a very discreet incident report form that you keep. For every incident, it my occur out of property. It should not talk about anything else, but the facts that were observed the statements that were made, at the time by people who were involved, time of day, photographs, but it really shouldn't get into any board policy or politics or talk about what the association should have done or should do in response to that.

It's all about what occurred to having a record of it and as you'll see later, you'll see why that type of of recommendation is important. And Sal, I'll cover the payment of medical and similar expenses because I think that's related. 

Michelle Colburn:

Okay. And, then hold on one second, then you have another question about a pool. So is it relevant if you have a pool function to have a lifeguard there? That was from Laurie.

Alan Tannenbaum, Esq.:

Okay. Let me get to those in a second. As far as a payment of medical and similar expenses. The association could pay the deductible for somebody's health insurance if they're injured. Again, any of the any of the promises to do that or the actual doing of it is not going to be invisible. So send them flowers, go to see them at the hospital, bring them a gift. If they're struggling to pay their health insurance deductible, it's certainly something the board to consider because it mitigates against the possibility that that party is really going to come against the association. So let me address a couple of the questions that Michelle has pointed out. All right, so [crosstalk 00:27:05]

Salvatore Scro, Esq.:

Alan, with regard to that pay medical expenses, what you said is important there. And this happens a lot, everybody goes to the doctor. Bedside manner is key. If you have a good bedside manner, it's less likely somebody is going to want to come after you for their piece of flesh. So it's always good to be nice. Like Alan said, you don't have to worry about certain things. As far as if you're paying medical expenses, or you offer to pay those medical expenses, that is something that ... The bedside manner is key. So keep that in mind.

Alan Tannenbaum, Esq.:

All right, let me answer Stan's question. That there's a legal opinion that the association wants to share with the owners. The reason the attorney-client privilege you want to make use of it is to protect the association from by a third party outside the community generally who would make use of that legal opinion and further a case against the association. If you get a legal opinion for instance from your lawyer about a covenant enforcement issue where it clearly expresses what the association's rights are, in enforcing the covenants, and you want to send that letter to the owners so that you can assure that your rules are going to be properly enforced.

There's really no impediment to releasing that letter. There's no downside to it. So in that case, what you're really talking about is are there instances where it's appropriate to waive the attorney-client privilege because that particular legal opinion is really helpful for the association to make that disclosure. So in that instance Stan ... Now, if the legal opinion was, let's say you had a construction defect case, and the lawyer wrote a lengthy letter talking about the strengths and weaknesses of the case.

You would not want to release that to the membership. You would not want to release that to or append that to the minutes. So the difference is can a third party who the association has got a legal dispute with make use of that opinion to their benefit? You want to protect the privilege. If it's an internal issue when there's really no downside to the large opinion being released to the community, there's less reason to protect it.

Yes and Laurie, yes, paying a medical bill does not assume any liability. So you can do that. There's a question about the condo is more liable if it holds a social event like a kid's pool party. Should they have guards there? It's a little bit outside the context of today's issue, and it would greatly depend on who's sponsoring the party. Is the association sponsoring it? Is it an individual owner who's bringing guests to the ... Put up your signage, you could probably request that they have a lifeguard on duty in order to approve a kid's pool party, that really gets a little bit outside of our field. That's a great general counsel question. So I'll leave it at that. Jon, you're going to talk to us about hearsay.

Jon Lemole, Esq.:

Yes, thank you. Folks, we probably spent ... Each of the three lawyers here probably spent weeks in law school going over hearsay rules, I'm going to try and distill what we learned in a couple of minutes here. So I hope I hit the points that are important to you all. And after 30 years of being a trial lawyer, and I'm sure other lawyers would agree with me when asked what hearsay is or is in most of us go, "Oh, I know it when I hear it." But here we go.

Let me see if I can share something here. Okay. So hearsay is one of those things that we deal with all the time, all the time in court because so much of what we know or so much of what we learn, and by we, I mean clients, people who may be testifying for the community on a certain issue, the source of that is maybe something that they heard from somebody else, or they saw written somewhere else. And so this is a very common thing that we deal with and that you all would deal with if you're in the position of having to litigate an issue before in court.

So let's talk about real quickly, what is hearsay. Hearsay in the statute is defined as a statement other than one made by the person who's testifying. So there's a person who's testifying in court about something and then there's the statement that's made by someone else who's called the declarant. But don't worry about that term, I'm in court saying that I heard or heard somebody say something, or read something that that somebody else authored or a statement in a document that I didn't see firsthand, or that I didn't experience firsthand.

So it's a statement other than the one made by the person testifying at trial. And here's the most important thing about hearsay is that it's got to be offered to prove the truth of the thing that you're saying. So let me give you a really basic example. And hopefully, this will clear it up for you. Somebody asks you, "When were you born?" You say, "In my case, I was born August 3rd 1966."

I don't know that firsthand. I certainly don't remember it. And if you do, I guess maybe you'd be a special person. But I know that because people have told me that's when I was born. Now, there's exceptions to this, certain family history is an exception to the hearsay rule, vital records. I learned this by looking at my birth certificate, that's all. That's all an exception to the hearsay rule. But that in a nutshell should give you a good idea of what hearsay is.

So anytime you're in court saying, "Well, I heard so and so say something." Or I read such and such in a report. You're going to get from the other side of hearsay objection, and then your lawyer is going to have to stand up and say, "Well, why can I ... Why is there an exception to this that I can prove here?" Let's talk about what a statement is. Okay. So talking about testifying as to a statement that's made by somebody else.

So it's repeating on the witness stand something someone else said or it's a document. I may be offering a document into evidence that contains statements of another person. So an incident report or a memorandum or a security law, gate logs, any of those things are potentially going to receive a hearsay reaction. Here's a new one, we'll have a little fun here. So here's Santa Claus and on the witness stand.

The other lawyer is saying, "So you admit that labeling my client is naughty is based on hearsay from other children, not from any actual facts?" That's just a funny way of encapsulating what the hearsay rule is. Okay, let me stop sharing this. Let's talk about exceptions. What kinds of things and I want to talk about this in the sense of what are some of the things that routinely happened with the Community Association and how you can anticipate these issues when they come up.

Okay, so the Florida Evidence Code defines divides exceptions into two instances. One where the person who said the thing is unavailable, can't find them, they're dead and therefore, you can admit certain statements that they made out of court. There are certain other exceptions that doesn't matter whether they're available now or not. So let's talk about the ones where the person whose statement you're trying to offer an evidence is unavailable.

You can always offer former testimony. So if that person is unavailable, and they've testified ... So let's suppose you have a member of your community, and you're in there, you've got an action against them for payment of assessments and this is the second case that you've had and in a previous case, you took a deposition of that person, and they said, "You know what? I'm never paying the assessments of this community, they're not going to get a red cent out of me." Then they die. You're suing their estate perhaps, to get these assessments and you want to admit that evidence that that prior sworn testimony. Well, you can do that as long as the person is not available or dead.

Here's another one that's interesting and important. Statement under the belief of impending death. So if a person is no longer available because they passed away, let's suppose you had somebody's walking on your property, they fall into a big, open, a hole in the sidewalk and after they fall into this hole and have this horrific head injury, they're lying there on the sidewalk, and they say, "I just fell into the hole. Oh my gosh, my head just went over, I'm going to die."

That statement if that person does pass away and somebody else goes into court say, "That's what he said. He said Billy tripped into the hole. That's what caused the injury, that's what caused him to die." That statement is admissible because it's a statement of a person who's commenting on the reason for their and the circumstances around their belief that they're about to die. Why is that important to a community if you have an incident? Right?

Anytime you have any kind of incident, accident at your community, it shouldn't be some ... There should be a procedure for getting out there. And having somebody get out there and record what's going on in the aftermath. What are people saying? So that you know and you can anticipate these things, and you can tell your lawyer, "Hey, be ready. This is what the guy said, somebody said, a passerby said that the person who fell in the hole said this is what they thought was this was the cause of the accident." That's all important stuff, your lawyer is going to want to know that to give you good advice on how to handle those things.

So the statement under a belief of impending death. The third one where you don't have to have ... Where the person is if they're not available, you can still admit a hearsay statement as if they make a statement against their financial or property interests. Okay, so any kind of statement which would be against detrimental to an interest that they have whether it's financial, or about their property. If they're unavailable, that stuff is deemed so important by the courts and the legislature that we don't take those statements lightly and people don't generally make them unless there's some ring of truth to them.

Okay, so those are the three areas of hearsay where you'd have to show if you want to admit those things that the person is no longer available. Now there's a whole another class of exceptions to the hearsay rule where it doesn't matter whether the person who said the thing. They may be alive and well, you don't need to bring them into court because certain types of statements ring true, they have an element ... And that's what underpins all this, they ring true there.

There's reasons to believe that people don't make these statements unless they're accurate or true or reliable. Okay, so I'm going to run through these real quick because I'm looking at the clock here. Spontaneous statements. Let's go back to the accident. Let's suppose somebody is watching this person fall into this big hole in the sidewalk, get horrifically injured, and they start yelling, "Oh my gosh, that guy just fell into the hole. He's bleeding, his skull is cracked open."

That person's statement about that spontaneous utterance of a condition or a thing that's happening, that is admissible. That person doesn't have to come to court. Somebody else can say, "I heard that person say that thing." Excited utterance, very similar to that. Spontaneous statements, excited utterances is they go hand in hand. There's statements about where somebody is excitedly, they're under the influence of this event or this condition and they're there spontaneously and excitedly utter, saying things about the thing about the condition that they're experiencing.

So again, from the association standpoint, anytime you have an incident, it's good practice to get out there and record what people are saying so that you can anticipate some of these things or it may be the opposite. Somebody may say, "Oh my gosh, that guy saw the hole, walked around it and faked it." You'd want to know that. Maybe that witness doesn't want to come to court, they don't want to be bothered, but you heard him say that. Well, that would be important to know.

So again, good or bad, know what you're dealing with, know what people are saying in incidents. A recorded recollection notes, not memorandums, incident reports. If you make an incident report while your security guard makes an incident report, it's fresh in their mind. It's got to be made in circumstances where it's fresh, it's at or near the time that the incident occurred, it doesn't have to be right then and there, but while it was fresh in their mind, they went back and recorded an incident report. Incident reports are going to be admissible, business records [crosstalk 00:42:56]

Alan Tannenbaum, Esq.:

Jon, before you move on from the incident report. So every manager and board member needs to hear this because in the introduction that I gave at the beginning of the session, we talked about being in court a year and a half after an issue occurred. And there's been a thousand things that have happened since then. And you can't remember precisely what occurred, but at the time that it did occur, you did a good memorandum or an incident report that was very factual, you could pull that report out.

It actually substitutes for your memory that, "I don't really remember it, but here's a report that I did at the time that it occurred." And that incident report or you're reading it, and then refreshing your memory. That's an exception to the hearsay rule. So that's why it's so important that the bias of the court system is recordations or recollections that are made at or near the time of the incident or the issue or there's a bias towards that evidence being admissible, versus eight months later deciding, "Well, I better write a report about that item I was involved in." That's less likely to be an admissible document for recollection eight months later. 

Jon Lemole, Esq.:

No, that's a great point. Yeah, absolutely. And when you think about the turnover that sometimes occurs in let's say with security personnel or guards, maintenance people, you may not have that person available, not that their availability matters under these exceptions, but those reports and the absence of a person a lot, that live person saying what they remember, that report is crucial. And even if you do have the person, they may say, "Well, it was a year ago, I don't really remember what happened, but I made a report about it."

Okay, here's the baby. This is one that lawyers deal with all the time and it's the business records rule or the business records exception. So anytime a company, an organization, a community association, a management company, any records that they regularly keep in the ordinary course of their business, it's a little bit more complex than that, but I'm going to distill it to those core elements. It's the regular records ordinarily kept in the course of the business of this organization and these are the types of records that this organization typically maintains or keeps.

All of those are going to come in under this exception to the hearsay rule. So the importance of this or for an association or management company is to have policies and practices around record keeping, and documentation of things. Okay, so architectural control issues. Let's say you deny somebody's request to paint their home a different color, the architectural review board denies an application. If you don't have a regular process for how you handled those requests, and the records relating to them, then you might not get certain information that's contained, or that was considered that that was discussed about that issue into evidence.

Similar thing would be security, security logs. You're logging, your security guard is logging all the cars that come in, you want to have ... That would qualify as a business record as to who came and went into the community. And so if somebody came into the community and committed a crime in the community, you could rely on that log to show, "Well, this car with this license plate which is registered to this person came into the community." I don't have to prove that ... I don't have to have the security guard come in and say, "Well, I saw it." I could put the records in and they would qualify under the business exception rule.

The key to that though is that you have to be ... The association has to be really careful and meticulous about keeping those records all the time and having policies about those, keeping those records, retaining those records. What are some of the others?

Alan Tannenbaum, Esq.:

Let's talk about assessment collection in particular because the corollary section is the absence of entry and records can also be admissible. So the reason management companies have a particular system for recording assessment payments where when a payment comes in, the software records, the receipt of that paper, or the non-receipt of that payment, you're a year and a half later trying to prove that the owner failed to pay their assessment and the person who for the management company who oversees that accounting system would be able to go in and say, "This is the practice, this is how the software works. Every payment that comes in gets recorded, gets data entry and here's a report for February of last year, and there's no showing of a payment for that particular unit."

That business record is going to get into evidence if it's properly authenticated to prove that that assessment payment is not paid, that particular employee of the management company is not going to remember for the number of associations that they're overseeing that that particular association one payment did not come in last February. But the authentication and the entry into evidence of the technology, the software and the report will get in. I'm sorry Jon, go ahead.

Jon Lemole, Esq.:

No, that's absolutely correct. And where we run into it frequently in our practice would be in how the community handles homeowners complaints or unit owner complaints. If you have strong protocols and procedures about handling complaints, that makes our job easier if we want to put evidence, a homeowner says, "I've got these huge cracks in the stucco on the outside of my building." Maybe we don't need to bring that owner in to testify about that if you've got a written complaint, and it's maintained in the regular course of the community association business and so on and so forth. So that's all really important stuff.

Admissions are always ... You hear somebody make an admission about something, then that's going to always be admissible even if the person is not there to make the admission in court. Former testimony goes without saying anybody gives testimony under oath, that would be admissible too even though it's hearsay. So those are the big exceptions, there's 20 more exceptions, but for our purposes, they're not going to be really relevant to what you all do. And we're getting near the end. So I'm going to pass it back to Alan, thank you.

Alan Tannenbaum, Esq.:

Okay, we're ask Sal, there's a few minutes we have left to talk about self-authentication in public records.

Salvatore Scro, Esq.:

Make this quick. Basically, what would concern the associations and the managers of this particular section goes along with what John said. For the most part, the public records which runs along with this, but self-authentication would be if there's something under seal or you can get a certification from the public officer that where the document is kept, it states that this is kept, and it was properly recorded. So if it's an official record, it was authorized by law to be recorded and actually was recorded, then the custodian of that can give a certification that this is a true document.

You would not need to bring in the maker of the document to testify as to the authenticity of the document. What's a concern for the management companies is just what Alan and Jon talked about, those particular documents. So an original or duplicate of evidence, this is what's coming from the statute that would be admissible under the hearsay exceptions which is maintained in a foreign or domestic location and is accompanied by a certification or declaration from the custodian of the records or other qualified person certifying or declaring that the record was made at or near the time of the occurrence of the matters set forth.

By or from information transmitted by a person having knowledge of those matters. For example, if you take an incident report, and it was kept in the course of a regularly conducted activity of the business, or entity, so you have to say, "For example, we always make these reports at times, events and incidents like this." And was made at a regular practice in the course of the regularly conducted business activity. Now, along with that, and I'll touch on this very briefly as public records.

Again, official records or documents to be recorded or file that actually were if they're authenticated as stated by the custodian of those records. So why would you need a copy of the records for example, if you have a dispute as to who has ownership of a particular condominium and you want to bring in a recorded deed or something like that? That may be an issue where you need to go to get a public record and get a certification of that public record, but for the most part, that's about where we're at on that.

Alan Tannenbaum, Esq.:

Yes, Sal, let me mention the assessment situation. If you're in an assessment collection, action, you are about to go to court, you have maybe one of the younger lawyers from the law firm showing up, please ask them if they have a certified copy of that assessment lien because a shrewd lawyer defending that unit owner with the lawyer presenting a copy of the assessment lien trying to get that into evidence can object to it on the basis that it's not a certified copy and I defended a unit or a very large assessment claim early in my career where the lawyer for the association did not have a certified copy of the lien.

We objected to it, the judge would not allow a recess and the lien count, and the ability to get attorneys fees fell with the fact that they couldn't get the lien into evidence because it was not a certified copy. So a little tip.

Salvatore Scro, Esq.:

Okay. Well, we have a few minutes and I'm sure we have some questions that we needed to address.

Alan Tannenbaum, Esq.:

There were some questions set in advance, which is better, arbitration or mediation? They actually are not ... Mediation as a settlement process. Arbitration is a situation where a private party determines a dispute and it's binding upon you, somebody who's not a judge. So we like circuit court, if you're going to take a matter to dispute to go to state court with it if the association's generally the plaintiff, but we believe and most cases end up getting mediated. So they're not really in opposition to each other. Let me see what else we had.

Salvatore Scro, Esq.:

One of the questions that came as I was speaking was, how do private emails apply to all of this? I believe that had to deal with either ... I don't know if that dealt with hearsay, or public records, or whatever, but private emails, again, if you're the one testifying in court, and the email was sent to you, then you would be able to testify as to the receipt of the email and who it was from. If you just want to introduce somebody else's email, that won't fly unless you or somebody copied on it.

You can't say somebody gave me this email, there would have to be some authentication to that. But again, as board members, you need to be careful about what you discuss through each other as a board between emails because those can be considered association records which would be discoverable. So I think [crosstalk 00:57:34]

Alan Tannenbaum, Esq.:

Yeah, we're going to answer a number of questions offline because we got a lot of good ones and we don't want to hold anybody up here. Really, the takeaways from today, get your procedures in order so that you can authenticate appropriately the business records that you might need to get it to evidence. Don't be afraid to be sympathetic to somebody injured on your property, that's not invisible. Definitely repair items that have the ability of causing further damage.

And don't combine your incident reports with opinions and policy and so forth. They should basically be a discreet document that as Jack Webb used to say, "Just the facts." Definitely recording what people said at the time, photographs appropriately marked, and so forth. So those are some of the takeaways. You could fill out the poll if you like. I see the Michelle put that up. Michelle will deal with CEU credits for all the managers, so contact her offline if you have any questions about that.

We'll try to answer as many questions as we can offline. Like I said, there were some very good ones, but this was a packed presentation. And anybody has any questions and follow up, we're happy to respond as long as again, it's within our areas of trial practice and it's construction, we're happy to respond to those. Other than that, we've hit noon.

Salvatore Scro, Esq.:

Thank you very much, good seeing everybody.

Michelle Colburn:

And Sal and Jon and Alan are available at anytime, so please feel free to reach out to them via email or me and we will answer your questions and thank you all for joining us, and we will see you at our next Smart Board and Property Manager Guide, Legal Guide in July.

Continue reading

Why do we need a construction defects’ lawyer to negotiate our defect claims against the developer? Why can’t the Board negotiate on its own?

The Board can negotiate on its own, but it may not be wise. Here's why:

  1. Preservation of Warranties: For condos, steps should be taken to preserve statutory warranties, which are limited in time. A construction defects' lawyer would be attuned to these and act to preserve the warranties while negotiations proceeded. A condo board acting alone could inadvertently allow warranties to run.
  2. Not Allowing Claims to Become Time Barred: Both the statute of limitations and the statute of repose limit the time allowed for pursuit of claims. A construction defects' lawyer would be attuned to these and act to preserve claims while negotiations proceeded. A condo or HOA board acting alone could inadvertently allow claims to become time barred.
  3. Identifying Responsible Parties: Construction defect claim recovery is often only maximized where parties beyond the developer are included in negotiations. A construction defects' lawyer will identify all potentially-responsible parties and include them in negotiations if necessary to bring about full recovery. A condo or HOA board acting alone could fail to include necessary parties beyond the developer and thus hamper the association from achieving maximum recovery.
  4. Compliance with Chapter 558, Florida Statutes: This statute requires that notice to the developer and other responsible parties be drafted in a particular form and sent via certified mail. After notice is sent, the responsible parties have the right to inspect the property and request documents from the association. A construction defects' lawyer would be sensitive to the requirements of the statute and assure that the association meets the conditions of the statute. A condo or HOA board acting alone could fail to comply with the statute, prejudicing the association's position if the matter ended up in court.
  5. Preservation of Evidence: A construction defects' lawyer would know that steps need to be taken to preserve evidence, and be aware of the consequences if evidence is not properly preserved. A condo or HOA board acting alone could fail to properly preserve evidence, prejudicing the association's position if the matter ended up in court.
  6. Determining the Settlement Value of the Claims: An experienced construction defects' lawyer will have significant experience in valuing claims and be able to advise the board on what would constitute a fair resolution. A condo or HOA board acting alone could fail to recognize the value of the claims and as a result aim too low or too high in negotiations.
  7. Negotiating Prowess: A experienced construction defects' attorney can present the claims in their best light and direct a negotiating strategy maximizing the association's leverage. Furthermore, just the appearance of an experienced construction defects' lawyer leading negotiations for the association is a clear message to the responsible parties that the association is serious about securing a fair settlement. A condo or HOA board acting alone would not nearly be as formidable in conducting negotiations on behalf of the association, leading in many cases to mediocre offers by the opposition.
  8. Making Sure the Settlement Paperwork is Right: Once a settlement is reached, it is customary for a settlement agreement to be drafted. A construction defects' lawyer will negotiate terms which best protect the association, including not waiving rights to pursue latent defects which might arise post-settlement. If the settlement involves remedial work, protections would have to be incorporated to assure adequate performance, including the establishment of warranties for the repairs to be performed. A condo or HOA board acting alone would not be aware of necessary settlement clauses to be included and others to be avoided.
  9. Justifying a Settlement to the Owners: Owners, either at the time of settlement, or even years after, may challenge the adequacy of the settlement reached. A Board will be in a much better position to justify the settlement reached if it is a able to report to the owners that an experienced construction defect lawyer was there every step of the way in advising the Board, including that the settlement reached were reasonable.

Continue reading

What is the appropriate role for a Transition Committee?

  • News

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. 

Continue reading

No more excuses, North Port code hearings resume Thursday

  • News

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

Continue reading

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

  • News

 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.

Continue reading

The Conundrum of Aging Florida Condominiums — Repair or Abandon?

  • News

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.

Continue reading

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

  • News

 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.

Continue reading

The Challenge of Aging Florida Condominiums

  • News

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.

Continue reading

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

  • News

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.

Continue reading

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

  • News

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 »

Continue reading

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

  • News

 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.

Continue reading

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

  • News

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." 

Continue reading

Construction industry group files lawsuit against St. Petersburg

  • News

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.

Continue reading

Breach of contract lawsuit filed over South Florida project

  • News

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. 

Continue reading

Sarasota

Main Office
1990 Main Street
Suite 725
Sarasota, FL 34236
Map & Directions
941-316-0111
888-883-9441
941-316-0515 Fax

Orlando

Branch Office
BY APPOINTMENT ONLY
214 S. Lucerne Circle East
Orlando, FL 32801
888-883-9441

Clearwater

Branch Office
BY APPOINTMENT ONLY
4000 140th Avenue North
Suite 180
Clearwater, FL 33762
888-883-9441

Fort Myers

Branch Office
BY APPOINTMENT ONLY
1415 Dean Street
Suite 100
Fort Myers, FL 33901
888-883-9441

Tannenbaum Scro © 2021 | All Rights Reserved | Website by Think Donson