How does our association know if there are any construction defects once the developer has transferred the property to the association?

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It would be nice if every condominium building, townhome or single-family home came with a "check engine" light . . . or maybe a "check building" light. But they do not. Even if such a light came on, what does it mean? Furthermore, looks can be deceiving and to a savvy developer looking to sell units, looks are meant to be deceiving. So how does a condominium owner association ("COA") or homeowner association ("HOA") know if there are any defects in the construction of the common elements of the improvements? Simple . . . they ASK.

Who to ask is the important question. The best way for a COA or HOA to find the answers to these questions is to ask a qualified forensic engineer. Selecting the best engineer is not easy. Definitely, it should not be based solely upon the lowest bidder. And it is also not a good idea for a COA or HOA board to take on the selection process on its own.

ASK FIRST of an experienced construction defect attorney, who they would recommend as an engineer to take on the investigation of the common elements of the property. The construction defect attorney can identify the engineer who they believe (based on their experience with various engineers over their years of practice) would best serve the COA or HOA to: investigate the type of construction (roof, stucco, windows, roads, drainage issues, etc.); identify the defects and any code violations in the construction; prepare a detailed written report with relevant photos of the defective conditions; and if necessary, serve as an expert witness in any action to recover for the defects. You want an expert that if called to testify in a deposition or at trial, can communicate clearly and in simple terms, and be interesting (no one wants to sit through a boring recitation of barely understandable technical information). The best expert engineer is also one that does not qualify his or her answers so as not to offend who they believe may be their next client, or who is afraid to take a clear position on their findings of the defective condition and appropriate repair. The wrong engineer can be, and usually is, a case-killer and a waste of association funds.

The forensic engineer can identify defects by a visual inspection by seeing things that the average person would not recognize. Cracking stucco is not always just a stucco problem or it may not be a stucco problem at all.It could be a framing problem causing movement in the building, or it could be a roof or window problem letting water intrude into the building causing the stucco to bulge and crack.

If areas of construction appear to be defective, in the opinion of the engineer, then a more intrusive investigation into the building may be prudent. This is where the engineer would deconstruct portions of the building in a peel the onion fashion, revealing the manner of construction to see if it was properly or improperly constructed, as well as to reveal any hidden damage. This is sometimes referred to as "destructive testing."

It is very important to have the construction defect attorney involved early on and throughout the engineer's investigation. The construction defect attorney can assist in what information is necessary for the engineer to obtain to support any action to recover for the defective conditions. Selecting a good construction defect attorney who brings on a forensic engineer who can serve to accomplish what has been discussed above, can usually facilitate a beneficial settlement for the COA or HOA without having to go to trial. The wrong "team" can lose your case before it ever sees the light of day, leaving the association member/owners to pay to correct the defective conditions, which could run several millions of dollars in some cases.

Any HOA or COA that is either new and at turnover stage or that is under 10 years old (a statute of repose period where, upon expiration, no further claim may be brought), should consult with an experienced construction defect attorney to determine if having an investigation is in the best interests of the association.

Salvatore G. Scro, Esq. is a board-certified Florida construction lawyer managing the complex litigation section of Tannenbaum Scro Lemole & Kleinberg. He represents clients involving various areas of litigation, real estate, and business matters including civil, construction defect, real estate and business litigation, real estate transactions and closings, contract, and business matters. 

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What is the appropriate role for a Transition Committee?

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

Motivating the Developer to Meet its Turnover Obligations

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

Information Gathering

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

Interaction with Governmental/Regulatory Authorities

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

Condition Inspections

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

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

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

What the Transition Committee Should Not Do

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

Conclusion

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

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Turnover? Why you need to hire an experienced construction lawyer right away!

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"Turnover" may be the most important event in the life of a condominium or homeowner association.Turnover transfers association governance from the developer to directors who are answerable solely to members and their wallets.Newly-minted owner-directors must manage millions of dollars of infrastructure such as roads, drainage systems, ponds, lift stations, and pools.For multi-family buildings, this can also include building roofs, stucco, paint, waterproofing and balconies.Florida law imposes a fiduciary duty on these volunteer directors to make well-conceived, long-term plans for maintaining and replacing these assets.The critical nature of this planning suggests that every post-turnover board consider hiring an experienced construction claims lawyer to assist in guiding the association through a successful completion of the turnover process.Let's explore 3 reasons why this is so.

1. The developer wants to walk away scot-free.

At turnover most developers want to resolve any lingering, obvious construction quality disputes with a cash settlement and a general release of all future construction-related claims.Working in tandem with the right forensic engineers, a construction attorney can assess whether there are any non-obvious, latent construction defects impacting the useful lifespan of major common elements.By foregoing this critical guidance the board may financially short-change its members, setting them up for large, unanticipated maintenance, repair and/or replacement assessments in the future.Don't fall victim to releasing a developer, only to later discover hidden construction defects requiring a surprise assessment.

2. The clock is ticking

Florida community associations have just ten years from completion to discover hidden construction defects and to sue the developer for compensation.In our experience the worst construction defects are rarely obvious.Hidden defects in roads, drainage systems, roofs, building envelopes, foundations and the like are rarely discovered without the right types of forensic investigation.An experienced construction defects lawyer knows what types of investigations to recommend in order to discover ticking time-bombs which may not go off until after the developer's immunity kicks in.

3. Statutory Warranties for Condominiums

Florida condominiums get an added benefit of extremely valuable, but limited-duration, warranties from their developers.Warranty claims are particularly impactful because the association need only prove that the covered element was defective within the warranty period.This is another example where an experienced construction attorney can assist in guiding forensic engineering investigations for maximum impact.Defects discovered outside the warranty period are often less valuable litigation claims against a developer than those discovered during the warranty period.Don't give the developer another free pass by ignoring the compelling compensation value of latent defects discovered while the developer's warranties are in existence.

To conclude, post-turnover, volunteer board members carry a heavy burden to be good stewards of their community's infrastructure, avoiding the surprise of unexpected repair or replacement needs.An experienced construction defects lawyer is crucial in guiding a new board through a complete investigation of its potential claims against the developer, ensuring that the developer – and not the association - bears full financial responsibility for the developer's defective work. 

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No more excuses, North Port code hearings resume Thursday

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NORTH PORT — The coronavirus excuse may no longer work.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Click here to read the full North Port Sun article

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

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 Typical Due Diligence in Purchasing a Business

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

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

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

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

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

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

Can Due Diligence Wait?

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

Summary

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

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COVID-19 and Condo Unit Entry – The Intersection of Exposure Risk and Protection of Association Property

These days Floridians find themselves sprinting towards hurricane season with the unfamiliar specter of a global pandemic still nipping at their heels. For condominium unit owners still practicing vigilant self-distancing, an association's need to enter into their unit may seem like a giant "not happening!" But is it? What are an association's duties and powers when it comes to entry into a condominium unit during the COVID-19 crisis?

The Association's Maintenance and Repair Obligation

By now it shouldn't come as a surprise to any property manager or board member that a condominium board has both statutory and contractual duties relating to the maintenance and repair of the community's common elements. Florida courts have stressed that an association board acts at its distinct peril in neglecting these duties. Not only does the board face the possibility of being directed by a court to take action, or the association being assessed damages for its failure to act, but under the Florida Condominium Act an association faces the prospect of having to reimburse a unit owner's attorneys' fees and costs in securing relief against a recalcitrant association. See Coronado Condominium Association, Inc. v. Scher, 533 So. 2d 295 (Fla. 3d DCA 1988).

Entry into Units – Standard Authority

There are times where discharging its maintenance and repair obligations requires an association to enter into an owner's unit. These instances are always ripe for disagreement. The Florida Condominium Act provides statutory authority on the association's side in the right circumstances. Fla. Stat. 718.111(5) allows a condominium association to enter a unit during reasonable hours in order to maintain or repair that which the association has a duty to maintain or repair, "or as necessary to prevent damage to the common elements or to a unit or units."

Despite this statutory ground for unit access, it is worth noting that Florida courts have construed these grounds narrowly. Recent appellate court decisions have looked for both: a) independent contractual authority to enter within the governing documents; and b) that the board's decision to enter is supportable as a reasonable business judgment under the circumstances. See, e.g., Small v. Devon Condominium B Association, Inc., 141 So. 3d 574 (Fla. 4th DCA 2014).

Emergency Powers

The Florida Condominium Act also vests boards with special powers during times of declared states of emergency. Fla. Stat. 718.1265(j). If an official state of emergency is declared, a condo board can authorize entry into a unit in order to "mitigate further damage" by arranging "for the removal of debris, or to prevent or mitigate the spread of mold or mildew, or by removing wet drywall, insulation, carpet cabinets or other fixtures." No doubt these approved mitigation efforts are directed squarely at hurricane events. However, the declaration of a state of emergency - even as to a global pandemic – will provide a board with broad statutory cover for acting decisively to mitigate concurrent storm or water-related damage to other units and common elements.

How Does COVID-19 Exposure Fit Into the Analysis?

Even without a declared state of emergency and enforced stay-at-home restrictions, owners may still be extremely reticent to allow strangers into their homes, and boards may be equally concerned about the safety of their employees and agents, or the legal ramifications of exposing people to the COVID-19 virus. These are valid concerns; yet, at the proverbial end of the day, a condo board must always act reasonably to protect, maintain and repair common elements and other units. State of emergency or not, as we approach the storm season in Florida many associations may find themselves in the unenviable position of having to risk COVID-19 exposures in performing otherwise reasonable actions to secure common property. It will be incumbent upon boards to ensure that their decisions are well-founded, documented, and otherwise reasonable under the circumstances.

Common sense should guide a board in implementing an entry into an owner's unit. As much notice as is practicable should be given. CDC guidelines relating to social distancing and disinfecting should be followed by those entering the unit. Unit owners should be pre-informed on exactly what precautions will be taken to minimize exposure risk. A savvy condo board would do well to establish and communicate these emergency protocols now, rather than hastily cobble them together immediately before, during, or in the aftermath of a weather catastrophe or plumbing leak.

Conclusion

Despite the novel and significant risks posed by the current coronavirus pandemic, COVID-19 should be appreciated as an existing condition to be protected against by following CDC guidelines; it should not be viewed as an excuse for avoiding reasonable protective action against imminent or further property damage. 

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The Conundrum of Aging Florida Condominiums — Repair or Abandon?

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

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

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

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

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

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

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The Challenge of Aging Florida Condominiums

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

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

The Duty to Repair

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

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

Deterioration Constituting a Material Alteration

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

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

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

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

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

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

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

Deterioration Affecting Insurability

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

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

The Fact that Rehabilitation is Costly is No Excuse

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

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

Voluntary Termination as an Alternative to Major Repairs

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

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

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

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

Involuntary Termination

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

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

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

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

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

Conclusion

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

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Quirky Florida Attorney’s Fee Decisions

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We advise owners to insert prevailing party attorney's fee clauses in construction and repair contracts, as it is more likely that you as owner will pursue a claim against the contractor then vice versa. But does the clause that is inserted cover all possible attorney's fees? Maybe not. In a case just decided by the Florida Third District Court of Appeal in Miami, Pardo v. Kaplan, attorney's fees for an appeal, as opposed to the main case, were disallowed because the note being enforced did not specifically provide for appellate attorney's fees in the event of enforcement. The clause in question provided:

Collection: In the event this note shall be in default and placed for collection, then the undersigned agree to pay all reasonable attorney's fees and cost of collection.

The Third District determined that "all reasonable attorney's fees" did not include attorney's fees on appeal. What should the clause have provided in order for appellate attorney's fees to be awarded?

Collection: In the event this note shall be in default and placed for collection, then the undersigned agree to pay all reasonable attorney's fees, including attorney's fees and costs on appeal, and cost of collection.

Turning to a second quirk, it is not uncommon if as owner you signed the contractor's form contract to confront a clause which provides for attorney's fees to be awarded to the contractor in the event the contractor is required to pursue legal action to collect what is owed under the contract. As an owner's lawyer, we looked kindly upon such clauses because Florida has a reciprocal attorney's fee statute. F.S. 57.105(7) provides that if a contract contains a unilateral attorney's fee provision, the court has authority to award attorney's fees to the other party in the event the other party prevails. Consequently, when pursuing contractors for recovery for defects in the work where such a contract provision was in play, for example, we would typically seek an award of attorney's fees per F.S. 57.105(7).

Unfortunately, last year the Fourth District Court of Appeal in Ft. Lauderdale created "a fly in the ointment" in the case of Florida Hurricane Protection and Awning v. Pastina, 43 So.3d 893 (Fla. 4th DCA en banc 2010). The owner had hired a shutter company to install hurricane shutters. The contractor walked off the job forcing the owner to hire another contractor to complete the work. The contract with the original contractor provided for attorney's fees in the event the contractor pursued a collection action. The owner sought attorney's fees against the contractor per F.S. 57.105(7) citing the unilateral attorney's fee clause in the contract.

The Fourth District unfortunately determined that since the contractor's attorney's fee clause was limited to the collection of money due under the contract, F.S. 57.105(7) did not apply to the owner's breach of contract action. Thus, the owner was left with no recourse for attorney's fees. Lesson to be learned: Be sure to insert a broad prevailing party attorney's fee clause in your contracts.

Disclaimer: The decisions reported are not necessarily the law in other appellate districts in Florida. To determine the law in the Second District Court of Appeal (Tampa Bay and Southwest Florida) on these points, specific research would need to be done on the decisions of the Second District.

Written by Alan E. Tannenbaum

This article first appeared on the Florida Community Association Construction Law blog


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Unit Owner Sues Condominium Association for Water Intrusion — Association Prevails

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Unit owner Jerome Feldman and his company sued the Villa Regina Association, Inc. for water damage in the unit from the common element. Generally, if damage to a unit is repairable, thus rendering the damage "temporary", the measure of damage is the cost of repair. Where the cost of repair would exceed the value of the unit or restoration is impractical, thus rendering the damage "permanent", the measure of damages is the diminished value of the unit.

Feldman presented his case solely as a permanent damage case, presenting as his sole measure of damages the diminished value of the unit of $1,453,000.00. Even though the $1,453,000.00 diminished value opinion given by the appraiser was based upon a contractor's estimate for repair, Feldman got "hoisted on his own petard" when the jury found the damage to be temporary, meaning repairable. The judge did enter judgment for Feldman for the $1,453,000., but the Third District Court of Appeal reversed finding that once the jury determined that the damage was temporary, Feldman's failure to have presented testimony proving the cost of repair or replacement was fatal to his case.

Feldman v. Villa Regina Association, Inc., 89 So.3d 970 (Fla. 3d DCA 2012).

Written by Alan E. Tannenbaum

This article first appeared on the Florida Community Association Construction Law blog 

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Sarasota’s Alan Tannenbaum witnesses France attack

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 Alan Tannenbaum describes the scene in Nice.

June 16, 2016 — Chicken and wine sauce may have saved Alan Tannenbaum's life.

The prominent Sarasota construction attorney was finishing the last leg of a two-week trip to France and Turkey. He was back in France for night to fly back to New York.

The weather in Nice was pleasant, in the 70s during the day, with lows in the 60s, a far cry from steamy Florida.

Tannenbaum knew there would be fireworks in Nice for Bastille Day, France's annual celebration of a seminal event in the French Revolution, so he grabbed a map from his hotel and started walking Thursday night toward the beaches for the festivities.

He was heading for the streets where a Tunisian driver would plow his vehicle into a crowd of revelers who had been watching the fireworks, killing more than 80 and injuring 202, including children.

Little knowing what the future would bring, Tannenbaum had the area circled on his map.

But he was hungry, so he stopped on the way, and when the attack did come, the lawyer was sitting outside of a cafe along a busy tourist corridor, just a block or two away.

Click to read the full Herald-Tribune article

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Attorney Alan Tannenbaum interviewed by Charlotte Sun about HD Custom Homes Fiasco

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 December 17, 2018 — It's a nightmare reminiscent of a case the firm handled a decade ago: Without warning, and under suspicious circumstances, a prominent homebuilder goes out of business. Subcontractors and suppliers haven't been paid. And dozens of customers are left holding the bag.

In 2007, it was CCI Homes. Today, it's HD Custom Homes in Charlotte County.

Firm principal Alan Tannenbaum was quoted at length.

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Defects from Repair Projects

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 Where HOAs And COAs Turn For Help With Repair-Related Construction Defects

Condominium owners associations (COAs) and homeowners associations (HOAs) have important responsibilities. Among other things, they must address repairs and remediation work that can affect the entire community. These necessary projects can give rise to costly disputes when something goes wrong. Multiple parties may be involved, including not only individual owners who may be unhappy with the work but also contractors and suppliers.

You can minimize the risk of disputes and defects by approaching these projects with the guidance of a knowledgeable attorney. Likewise, when potential construction defects arise, experienced legal guidance is critical for avoiding further headaches.

How We Help Community Associations, HOAs, And COAs Solve Problems
At Tannenbaum Scro, we are well-versed in Florida construction defect law, particularly as it affects community associations. You can benefit from our 30-plus years of experience and in-depth industry knowledge. Our attorneys have secured positive results in multimillion-dollar construction defect cases. With strengths in negotiation, mediation, arbitration, and litigation, we offer guidance on avoiding construction defects in the first place, identifying any defects in a prompt manner and pursuing favorable outcomes once defects have arisen.

You can count on our proven skill at resolving high-stakes disputes in a creative, cost-effective manner.

With offices in Sarasota, St. Petersburg, Fort Myers, and Orlando, we represent COAs, HOAs and association managers throughout Florida. Our legal team can help you address all aspects of the project, including:

Choosing reputable contractors: Unfortunately, there are far too many unscrupulous and incompetent contractors who won't hesitate to take your money and then fail to deliver. Vetting contractors is a critical step in avoiding the headache of construction defects. Our lawyers can help you choose reputable contractors for your repair, renovation or remediation project. We're very familiar with the Florida construction industry.

Vetting construction contracts: When it comes to major projects, solid construction contracts are the foundation for success. Our lawyers can help ensure that the contracts outline clear expectations, align with your vision and goals, and provide strong legal protections in the event of a dispute or defect.

Preparing meticulous documentation: If a construction defect should arise, thorough documentation – including detailed "before and after" photos, inspection reports and the like – are essential for building a strong case.

Helping you enlist the right inspector: For major projects, having a trusted, independent inspector review the completed work is essential for identifying any defects promptly. We can connect you with a trusted expert who has the right credentials, background, and experience specific to your type of project.

Get Started With A Consultation
To contact our lawyers, please call our Sarasota office at 941-316-0111 or toll-free at 888-883-9441. We also offer appointments at our offices in St. Petersburg, Orlando, and Fort Myers, and our team works with community associations statewide.

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Contract Disputes

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Resolve The Toughest Contract Dispute With Our Help
Contract disputes can be immensely confusing and stressful — for employers, but particularly for employees. Of course, these issues are challenging whenever they arise. If you or your business organization is involved in any contract dispute, it is important to protect your interests in the immediate and long-term future by partnering with experienced counsel.

Our Business Lawyers Handle Cases In Clearwater, Sarasota And More
Our attorneys at Tannenbaum Scro are prepared to bring more than three decades of business law and litigation knowledge to work on contract dispute issues, including:

  • Partnership disputes and business dissolution
  • Licensing agreements
  • Trademark or copyright infringement
  • Contracts for goods and services
  • Noncompete and nondisclosure agreements
  • Business torts (fraud or unfair business practices)
  • Business transactions (buy-sell agreements, acquisitions)
  • Real estate transactions
  • Commercial lease disputes
  • Construction contracts
  • Land use and property disputes

Regardless of your scenario, we will do everything possible to resolve the issues as economically and efficiently as possible.

We also understand that these types of disputes do not necessarily end the relationship between customers, vendors, employees, business partners, neighbors, and family members. As such, we do everything we can to reach thoughtful, creative solutions that allow both parties to walk away satisfied. Whenever possible we will pursue methods of negotiation and alternative dispute resolution. We encourage you to get in touch as soon as possible.

To schedule an initial consultation to discuss any contract dispute issue in Florida with one of our lawyers, call our office in Sarasota at 941-316-0111, toll-free at 888-883-9441 or email the firm. 

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Business Formation

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 Form Your Business With Our Experience

Correctly forming a business is of crucial importance. The way a business is filed sets the groundwork upon which operations work for years to come. Correctly forming with respect to jurisdiction is of crucial importance, as is the identification of the long-term business goals. LLCs, partnerships, and corporations are vastly different.

If you are working to form a business, we are prepared to put more than 30 years of experience to help you address all issues.

Our Lawyers Will Draft Your Partnership, LLC Or Other Agreement
Regardless of your business formation issue, our attorneys at Tannenbaum Scro will do everything to ensure legality, account for all potential consequences and file all documentation to assure proper long-term stability.

We are prepared to work on articles of incorporation, bylaws, partnerships, annual filings and lists of officers for formations of:

  • C corporations
  • S corporations
  • Professional corporations (PC)
  • Limited liability companies (LLC)
  • Limited liability partnerships (LLP)
  • Partnerships
  • Limited partnerships (LP)
  • Family limited partnerships (FLP)
  • Joint ventures
  • Mergers and acquisitions
  • Business succession
  • Sole proprietorships

Regardless of your business law issue, we will work directly with you so that we fully understand all of your objectives. We encourage you to get in touch as soon as possible so that we can start putting our experience to work to help you realize your goals.

To schedule an initial consultation to discuss any aspect of business formation with one of our Clearwater and Sarasota business formation lawyers, call 941-316-0111, toll-free at 888-883-9441 or email the firm.

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Keys to a Successful Claim

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How To Raise A Strong Construction Defect Claim: 5 Keys To Success

Construction defects can be extremely costly, particularly when they involve multiple homeowners or condominium owners. When a community association gets involved, the stakes are often high. Pursuing these claims in an efficient, effective manner requires a thoughtful approach. Here are some tips for success.

1. Get Legal Help From A Knowledgeable Attorney

Construction defect claims can be extremely complicated. Not many Florida attorneys focus on this niche area, and fewer still are board-certified in construction law through The Florida Bar, as is one of our principal attorneys at Tannenbaum Scro.

We can guide you through all steps in the process, from investigating potential claims to pursuing presuit notice to filing a claim in court, if necessary. And the sooner we get involved, the more opportunities we have to build the strongest possible case.

2. Identify Defects As Soon As Possible

Time limits apply for bringing construction defect claims. Depending on the situation, the clock generally starts ticking:

Unfortunately, not all defects are noticeable to the untrained eye. That's why it's so important to have a thorough, independent inspection during the turnover process and after the completion of any work.

Which brings us to the next point…

3. Enlist The Right Experts

Construction experts play a big role in defect claims. You need the right expert to identify and investigate defects, which will ensure that the right parties are held responsible. The right expert might be an engineer, architect or another construction professional, depending on the defects involved. This professional should have:

  • Strong credentials
  • Experience handling the specific type of work involved
  • Experience serving as an expert witness
  • A respected reputation in the construction industry
  • A reputation as an independent expert

Should your claim proceed to litigation, the right expert will be essential for presenting a rock-solid case in court.

4. Document Everything

Meticulous documentation can mean the difference between a successful construction defect claim and a costly failure. The more documentation you have – and the more thorough it is – the better. This means, for example:

  • Preparing written condition and inspection reports of the premises
  • Taking "before and after" pictures of the work performed
  • Having a lawyer vet your construction contracts
  • Keeping records of emails and other written communications involving the work
  • Making sure that changes to the scope of the work or assurances by the contractor are put in writing (and preferably reviewed by an attorney)
  • Having affected owners sign off on the work performed

Every association should have thorough documentation practices in place, particularly when it comes to repair projects and other construction work.

5. Do Your Due Diligence

It's far better to avoid construction defects in the first place. Owners and associations can go a long way toward minimizing their risk by thoroughly vetting contractors (and other construction professionals) before proceeding.

Our lawyers are very familiar with the Florida construction industry and can help you choose the right professionals for your type of project. We can also negotiate and review construction contracts – a critical step in aligning expectations and reducing the risk of disputes down the road.

Learn More

For guidance on any aspect of Florida construction defect law, call our legal team at 941-316-0111, toll-free at 888-883-9441 or send us an email. With offices in Sarasota, St. Petersburg, Orlando, and Fort Myers, we represent owners and associations throughout southwest/central Florida. 

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Sarasota

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1990 Main Street, Suite 725
Sarasota, FL 34236
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888-883-9441
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Fort Myers, FL 33901
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