Friday, December 11, 2009

Supreme Court and Protestants: down to one

Take a look at the Supreme Court: 22% Jewish; 11% Hispanic; 11% African American; 22% 66%...Catholic(!)....when Justice John Paul Stevens retires there will not be a single protestant on the Court. Just a generation ago it was thought that a single Catholic was too many and Heaven forbid a Latino Catholic woman!

Friday, November 20, 2009

Defamation in the Association

The topic of what, if anything to do about idiots who say and print defamatory remarks about directors and other in the context of community association operations is far too common.

Here is an actual inquiry and my reply, which accurately sums up my analysis of the issue...

On Fri, Nov 20, 2009 at 3:47 PM, XXXXXXXX wrote:

Dear Bob:
I received a copy of a letter that has been mailed out to [all] homeowners. I feel it is a defamation against me. Do I need Board approval to send it to you for your advise? If there is a charge for this question, please bill me seperately from the Association.....

Hi XXXXX; I'd be happy to take a look at it, but here is my view on the matter. Under Florida law, defamation is an action where the party who prevails cannot recover legal fees. Unless a letter causes you great financial (as opposed to emotional) harm, it is never cost effective to sue.

The case can go on for a year, cost you $50,000 (easily) and what financial damages can you prove and then collect?

If you get fired from your half million dollar a year position as Secretary of the Association (ha!) then it would be worth suing; I suggest you see what kind of reception the letter gets and let's decide what do to....the fact is that most people who read the rants of fools end up concluding that the fools are not worth listening to....

Tuesday, November 17, 2009

The beginning of the end of segregation

On Nov. 13, 1956, the Supreme Court upheld a ruling that found the segregated bus laws in Montgomery, Ala., to be unconstitutional. The city of Montgomery, Alabama's bus system forced blacks to sit at the back of the bus and, if all the seats were taken, give up their seats to whites. It began with the arrest of a 15 year old, Claudette Colvin, and culminated with tthe arrest of Rosa Parks. The rest is history...

Sunday, November 15, 2009

Mechanics liens and your association

Every so often it's worth repeating that protecting the association and its' members from payment claims by subcontractors and material suppliers is an important aspect of any contract work subject to the mechanic's Lien laws. Any time certain improvements (repairs and replacements count too) are made in excess of $2500, the Association must take steps to prevent being liable to pay twice for the work and materials. This involves, among other things, recording and posting a Notice of Commencement and obtaining partial and final payment affidavits, and paying attention to those "Notice to Owner" documents that may arrive in the course of the work.

The following case deals with a direct claim by a contractor, but lays out the circumstances under which an unpaid contractor, subcontractor or material supplier can obtain a lien and foreclose on the condominium parcels. Be careful!


A Writ of Certiorari to the Circuit Court for Miami-Dade County, Mary Barzee-Flores, Judge. Lower Tribunal No. 06-24673.

Elder & Lewis and David R. Elder and Kerry H. Lewis, for petitioner.

Peter V. Fullerton, for respondent.

The opinion of the court was delivered by: Salter, J.

Before RAMIREZ and SALTER, JJ., and SCHWARTZ, Senior Judge.

Trintec Construction, Inc. seeks certiorari from a circuit court order discharging its recorded mechanic's lien claim. We grant the writ, quash the order below, and thereby reinstate Trintec's claim of lien.

I. The Roof Work and the Lawsuit

The respondent, a condominium association, contracted with Trintec for roof repairs to multi-unit buildings in thirteen separately-declared, but collectively-managed, condominiums. The written contract between Trintec and the Association included a recital that the Association was the governing body for all of the affected buildings, and the contract was signed by the president of the Association.

In April 2006, Trintec claimed non-payment and default, and it recorded a claim of lien for approximately $1.3 million the following month. The property description within the lien identified the entirety of each of the thirteen condominiums by recorded declaration, rather than the individual units and common area parcels in the condominium buildings where the work was performed. In late 2006, Trintec filed a lien foreclosure complaint and lis pendens against the Association and the property as identified in the claim of lien.

The trial court initially granted the Association's motion to dismiss the complaint without prejudice, allowing Trintec twenty days within which to amend. That order did not identify any deficiency in, or grant any relief regarding, the recorded claim of lien. The Association then sought and obtained an emergency hearing to "clarify" the trial court's ruling as it pertained to the lien.*fn1 The Association persuaded the trial court to enter a further order dismissing and discharging the lien "without prejudice." The trial court accepted the Association's argument that the individual unit owners were indispensable parties to the lien foreclosure action, and that Trintec's statutory mechanic's lien claim could not proceed without the joinder of those unit owners.

Trintec's motion for clarification and to vacate the further order discharging Trintec's lien was denied in February 2008, and Trintec then filed its petition here.

II. Analysis

This Court initially denied the petition without prejudice to Trintec's right to amend its complaint, claim of lien, and lis pendens to conform to a more specific property description as detailed in Royal Ambassador Condominium Ass'n v. East Coast Supply Corp., 495 So. 2d 932, 935 (Fla. 4th DCA 1986). Trintec moved immediately for clarification of that order, however, based on its concern that by statute it could no longer amend its recorded claim of lien. We then directed the Association to file a response to Trintec's petition and its motion for clarification.

The parties' written submissions disagree regarding the primacy of the condominium law provision regarding mechanic's liens, see section 718.121, Florida Statutes (2006), versus section 713.08, Florida Statutes (2006), the mechanic's lien law requirements themselves. In essence, the question is whether the "owner," for purposes of the lien law's application to a condominium property and improvements to its common elements, is: (a) each and every unit owner in the condominium; or (b) the condominium association created by the declaration. The Association argues that the mechanic's lien law's use of "owner" means each individual condominium unit owner, such that those owners are indispensable parties.

We consider in turn section 718.121(2) of the Florida Statutes; the applicable provisions of Chapter 713; Florida Rule of Civil Procedure 1.221, entitled "Homeowners' Associations and Condominium Associations"; and the decisional law regarding these provisions, in order to harmonize all of them in a fair and practicable way.

A. Section 718.121(2)

Section 718.121, entitled "Liens," protects unit owners by limiting the manner in which liens may be imposed upon condominium property after the declaration of condominium has been recorded. First, section 718.121(1) requires the unanimous consent of all unit owners for the imposition of any lien against "the condominium property as a whole," and it further provides that "liens may arise or be created only against individual condominium parcels." This affords a basis, for example, for an individual unit owner to record a mortgage lien over his or her unit.

Section 718.121(2) addresses mechanic's liens in particular and under the scenario involved here:

Labor performed on or materials furnished to the common elements are not the basis for a lien on the common elements, but if authorized by the association, the labor or materials are deemed to be performed or furnished with the express consent of each unit owner and may be the basis for the filing of a lien against all condominium parcels in the proportions for which the owners are liable for common expenses.

Finally, section 718.121(3) confirms that if a valid lien encumbers multiple condominium parcels, each owner of an encumbered parcel may exercise the rights of a property owner under Chapter 713*fn2 "or by payment of the proportionate amount attributable to his or her condominium parcel" (entitling the payor to a lien release for that parcel).

In this case, clearly the Association authorized Trintec to provide the labor and materials for the roof work. The express consent of each unit owner is thus "deemed" to have been given, and Trintec could properly file a lien against all condominium parcels in the proportions for which the owners are liable for common expenses. See § 718.121(2).

B. Chapter 713

Turning next to the mechanic's lien law itself, we consider the validity and enforceability of the actual claim of lien filed by Trintec. Sections 713.08(1)(d) and (e) specify that a recorded claim of lien "shall" state a description of the real property sufficient for identification and the name of the owner. Trintec's claim of lien described the entire condominium by identifying each declaration of condominium in its entirety, and it identified the owner as "Countryside Village Property Owners Assoc[iation]" at the address of the Association's designated representative identified in the contract.

Section 713.08(4)(a) provides that an omission or error within a claim of lien "shall not, within the discretion of the trial court, prevent the enforcement of such lien as against one who has not been adversely affected by such omission or error." The Association's response commendably concedes that it cannot show any such adverse effect in this case.*fn3 Section 713.08(4)(b) permits the amendment of a lien "during the period allowed for recording such claim of lien, provided that such amendment shall not cause any person to suffer any detriment by having acted in good faith in reliance upon such claim of lien as originally recorded." Because that period had expired,*fn4 Trintec could not record an amended claim of lien adding the unit owners at the time the trial court discharged Trintec's lien. Section 713.08(4)(c) directs that a claim of lien "shall be served on the owner," raising again the need to determine the "owner" of the condominium roofs.

Section 713.11, entitled "Liens for improving land in which the contracting party has no interest," precludes the attachment of a mechanic's lien to land if the contracting party for the labor and services has no interest in that land. In this case, however, the Association has an "interest" in all of the condominium parcels--the declaration grants the Association unique rights regarding the common elements, and Chapter 718 permits the Association to impose and collect liens on the units for unpaid assessments.

C. Florida Rule of Civil Procedure 1.221

A further source of guidance is found in Florida Rule of Civil Procedure 1.221, entitled "Homeowners' Associations and Condominium Associations." After control of a condominium association has been turned over by the developer to the unit owners, the association is a proper party to "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: (1) the common property, area, or elements; (2) the roof or structural components of a building, or other improvements . . . ." Fla. R. Civ. P. 1.221.

So it is clear that, if the Association is unhappy with the roof work performed by Trintec, the Association can bring an action as a single plaintiff on behalf of the affected unit owners. The unit owners themselves need not join that lawsuit as plaintiffs. The issue before us, however, is whether the converse applies--if Trintec sues the Association, may it sue the Association as the representative of all affected unit owners without naming and serving each such unit owner as a separate defendant? The Association maintains that due process and the lien statute require the identification of each unit and the joinder of each unit owner in any such action. That argument seems reasonable, particularly in a state in which many unit owners spend part of the year away from their unit and in which condominium associations are occasionally dysfunctional. If the Association is correct on this point, the statutory period for amending the lien and filing against each owner has long since expired and Trintec will no longer have a statutory lien.

But Trintec's argument is also reasonable--the Association is the democratically-elected representative of the owners; the owners empowered the Association to enter into a contract; and the cost and delay inherent in identifying, pleading against, and serving a multitude of owners (and then substituting a new owner for a predecessor during the pendency of the case as units are sold or otherwise transferred) would be substantial. Moreover, the Association has a statutory duty to keep the unit owners apprised of the lawsuit and their exposure:

In any legal action in which the association may be exposed to liability in excess of insurance coverage protecting it and the unit owners, the association shall give notice of the exposure within a reasonable time to all unit owners, and they shall have the right to intervene and defend.

§ 718.119(3), Fla. Stat. (2006) (emphasis added).

Just as the Association was empowered to contract for the roof work for the benefit of the unit owners, then, it seems that the Association is the logical entity to manage and defend the lawsuit relating to that work. If the unit owners decide to exercise their statutory rights under Chapter 713, they can do so, and they have an absolute right under section 718.119(3) to intervene in the lien foreclosure and contract lawsuit brought by Trintec.

In adopting the precursor to Florida Rule of Civil Procedure 1.221, the Florida Supreme Court concurred with the position of The Florida Bar's Consumer Protection Law Committee that the rule, "expressly declaring condominium association members a class as a matter of law without the necessity for pleading or proving the traditional seven class action elements," adequately protects the individual association members "from capricious or arbitrary class actions by the governing authority of the association through provisions of Chapter 718 . . . as well as decisions which impose a fiduciary duty upon the governing body of such associations to afford due process and equal protection to its members." In re Rule 1.220(b), Fla. Rules of Civil Procedure, 353 So. 2d 95, 97 (Fla. 1977).

D. Applicable Case Law

In Graves v. Ciega Verde Condominium Ass'n, 703 So. 2d 1109 (Fla. 2d DCA 1997), the Second District considered a similar set of facts. Graves entered into a contract with Ciega Verde Condominium Association to repair exterior siding on the condominium buildings. Graves filed his mechanic's lien foreclosure claim and lis pendens against the unit owners, however, as well as the association. He sued the association as class representative for all unit owners on the basis of rule 1.221. The association alleged in its affirmative defenses that the claim of lien was improperly served on the unit owners. Graves prevailed on a companion contract claim in arbitration, and then moved in the circuit court to confirm that award and set a trial date for the lien foreclosure claim. Graves obtained a judgment and a sale date, but new counsel for the unit owners then persuaded the trial court to dismiss the individual unit owners because they had not been served within 120 days from the filing of the complaint. By that time, Graves could not bring a new action against the individual unit owners because the applicable statute of limitations had expired.

The Second District reversed, holding that the trial court "obtained jurisdiction of the unit owners because they constituted a class because of their membership in the Ciega Verde Condominium Association." Graves, 703 So. 2d at 1111. The Court held that Graves was not required to join or serve the individual unit owners. It found that "[t]he concerns of due process are sufficiently addressed by the fiduciary duty that the board of directors have [sic] to the members of the association." Id. at 1112.

In this case, Trintec did not name or join the individual unit owners (as Graves had), but rule 1.221 and the Graves decision do not require those procedural steps. Indeed, in Cooley v. Pheasant Run at Rosemont Condominium Ass'n, 781 So. 2d 1182 (Fla. 5th DCA 2001), the Fifth District affirmed a trial court ruling that the unit owners were not proper defendants in a personal injury lawsuit brought against the condominium association for injuries allegedly sustained upon common elements. The trial court dismissed the claims against the unit owners with prejudice and indicated that their joinder might be subject to fees under section 57.105 of the Florida Statutes. Id. at 1185 n.1.

Finally, in Four Jay's Construction, Inc. v. The Marina at the Bluffs Condominium Ass'n, 846 So. 2d 555 (Fla. 4th DCA 2003), the Fourth District reversed a final judgment that dismissed with prejudice a balcony contractor's claims for breach of contract, quantum meruit, unjust enrichment, and promissory estoppel against all owners of record of individual condominium units as a class. The condominium association had been named and served as the class representative. In that case, there was apparently no claim for the foreclosure of a mechanic's lien, but the Court held that "unit owners may be sued, pursuant to [rule 1.221], with the association as representative." Id. at 556.*fn5

Upon consideration of the applicable condominium and mechanic's lien provisions, rule 1.221, and prior decisions, it seems clear that Trintec is entitled to proceed against the Association as the representative of all unit owners. Trintec is not required to join the individual owners as indispensable parties. As noted, the unit owners are free to intervene in the lawsuit below. They are also free to exercise their rights under Chapter 713, including the right to "bond off" their proportionate share of the lien amount*fn6 to facilitate a sale, refinancing, or other transaction. The unit owners also have remedies against the Association and its officers and directors if the lien against their unit resulted from improper action or omission of the Association.

III. Conclusion

This is an appropriate case for the exercise of our certiorari jurisdiction. The competing interests of the contractor and the individual unit owners are substantial and each worthy of protection; it is understandable that the trial court would consider the unit owners' interests paramount. Nevertheless, the order discharging Trintec's recorded lien departs from the essential requirements of the law, as detailed above, and relief is necessary to prevent the loss of the contractor's statutory remedy. We therefore grant the petition and quash the order discharging Trintec's claim of lien, with the result that the claim of lien is reinstated.*fn7

Petition granted; order of discharge quashed.

Opinion Footnotes
*fn1 The Association's motion to dismiss requested dismissal of the complaint; it did not request the discharge of Trintec's claim of lien. The Association did not file a separate motion regarding its "emergency" request for clarification of the order dismissing the complaint.

*fn2 These rights include, for example, the right to "bond off" the lien claim (section 713.24), and rights to a final affidavit (section 713.06), and a list of subcontractors and suppliers (section 713.165).

*fn3 If the Association had alleged an adverse effect, an evidentiary hearing would have been required to resolve that question of fact. See Royal Ambassador, 495 So. 2d at 935.

*fn4 Section 713.08(5) allowed 90 days from the date Trintec's "final furnishing of the labor or services or materials." Trintec's original claim of lien was recorded during that period.

*fn5 The Fourth District certified to the Florida Supreme Court as a question of great public importance [w]hether rule 1.221 authorizes plaintiffs to sue individual owners of condominium units (to the extent of their interest) as a class of defendants, by suing the condominium association as class representative, as distinguished from simply suing the condominium association as contracting party, in a controversy concerning matters of common interest.
Four Jay's, 846 So. 2d at 559. The supreme court did not accept jurisdiction.

*fn6 It bears repeating that a unit owner's unit is only subject to a non-recourse percentage of the total lien amount (if ultimately allowed by the trial court) "in the proportion for which [the] unit is liable for common expenses." Royal Ambassador, 495 So. 2d at 934. A unit owner is not personally liable for any obligation incurred by the Association beyond "the value of his or her unit." § 713.119(2), Fla. Stat. (2008).

*fn7 Trintec's amended complaint, if filed, is not before us. We note that the original complaint fails to include a specific allegation identifying the Association as the representative of the class of condominium unit owners pursuant to rule 1.221, or to confirm Trintec's representations in its submissions to this Court that the lien claimed on each unit is limited to that unit's proportionate share of common expenses. It would unquestionably aid the trial court, any further appellate review, and any examiner of title to an individual unit, for Trintec to provide express allegations on each of these points in an amended pleading.

Saturday, November 14, 2009

What directors can learn from the Supreme Court

This link relates to for profit directors, as well as a good overview of the Supreme Court and how it works. Its worth a read. Many directors of community associations do not understand the magnitude of the asset base they are responsible for. Even a "small" community with 30 homes each worth $200,000 is responsible for operating a $6 million asset. This goes to my saying that professional management is not a cost, but an asset, so you can be prepared to be at your best at your on the highlighted underlined sentence above!!!!!

Monday, November 2, 2009

Cutting services to delinquent owners

In this economic climate clients are frequently asking if certain services can be shut off. Most frequently, we are asked if the cable television paid for on a bulk basis can be shut off in a condo community. The answer is "no" because that is not a remedy granted by law. Condominiums only exist because there is a law that provides for their existence and the rights and remedies of owners and associations are set forth therein. The law simply does not allow it. Recently an HOA amended its documents to provide for authority to install individual water meters and cut off water to those people who did not pay. A trial judge refused to allow the association to do so, apparently for equitable reasons. Perhaps the judge's thoughts were the same as the Supreme Court of New Hampshire which recently ruled that an owner cannot shut off the cable of a non-paying tenent as it amounted to what is known as "constructive eviction."

read on---

The New Hampshire Supreme Court has ruled that cable television is a protected utility service under state law that can't be shut off during landlord-tenant disputes.

The court on Friday reversed a trial court judge's decision to dismiss a claim by Christopher Lally, who was being evicted by his landlord last year and lost the cable connection. The landlord, Lauren Flieder, argued that the cable provider told her Lally's apartment was receiving the service through an illegal connection, so she disconnected the wire.

The state Supreme Court found the law regards cable TV as a protected service and that Flieder's action basically amounted to a self-help eviction, which is illegal in most states, including New Hampshire. It sent the case back to the trial court for further review.

Sunday, November 1, 2009

Deed restriction issues..

I just do not understand how people think they are not subject to the deeed restrictions they are subject to. Violators become the subject of court action and newspaper articles...I recall that Dr. Faye mayberry did her thesis on the issue of how many read the restrictions that come with condominiums (prospectus, sales contract declaration,. etc...). The percentage was...

Less than TWO!

Friday, October 30, 2009

Recruiting HOA Board Members: How to Succeed

One of the most difficult parts about community association operations is how to groom leadership for the future. While my friends at and and some of their followers may believe that directors all need to be thrown out and that most boards are "Condo Commandos" the vast majority of directyors I jhave dealt with in almist 30 years(!) of this practice would gladly step aside if someone half as dedciated and hard working as they are would volunteer.

From a Political Science perspective, I cna see how Communism failed, partly because the party could never afford to groom leadeers, as the leaders would then be powerful enopugh to replace one set of tyrants with another, commmunity associations are more like local governments in New hamoshire, where citizen initiatives and citizen inout are apramount.

Of course there is the element of complexity that has been introduced by our friends in the Legislature over the past 10+ years, as well as the DBPR, and the notion of th e"carefree lifestyle" that has always sold people on Florida, when it comes right down to it, it seems that the more dedicated job the directors do and the more well run the community is, the less likely it is that others will take their turn at the helm. Read on for how one community did it....

This from our friends at

For a new article we asked board members from around the country to share their tips on recruiting good HOA board members. This week's tip is from Karla Jo Helms, a board member at Sunset Point Town Homes in Clearwater, Fla.

She told us, "I get people to volunteer by picking the happiest, most productive people I know--because in my observation, happier, busier people get things done and complain the least-- and elicit their help by pushing their "responsibility buttons."
In other words, most people want to help, so asking them to help is pretty easy.

"But I also tell them that one thing to think about is that if they don't help, someone else will step up to do the job in a
way that could make their lives hell. It's happened. You know the people who have nothing better to do than to sit on their porch or by their window and document every tiny infraction, making the neighborhood a living hell. That usually does the trick.

"Another key factor is the property manager. We hire a real stickler for the law and any rules that could get us in trouble with state or federal agencies if not followed. I like that. It's his job to make sure rules are followed, handle most everything for the board, keep us in line, and let us know the law. That's a big factor in getting volunteers.

"If you don't have a property manager, the board's workload is much greater, and your likelihood of getting and keeping
volunteers will be much lower. We pay $500 per month for ours, but he saves us soooo much money every year with insurance negotiations, hiring workers, handling all our potential liability issues, and so on. And I don't get homeowners coming to my door to tell me anything. It all goes to the property manager."

Karla Jo concluded, "It didn't used to be this easy for us. The recipe for us has been having great volunteers who get things done, reserves in the bank, and making sure the laws and rules are followed. It's a pretty happy neighborhood now."

Find out what four more board members and association experts had to say about their experience. Read our new article:

Sunday, October 25, 2009

What else is new? Defective construction shows up in NYC condos

This is from the New York Times:

October 25, 2009

Your New Condo Leaks? Join the Club

ROOFS and windows that leak whenever it rains.

Heating and air-conditioning units that can’t quite heat or cool the entire building.

Balconies with flaking concrete and wobbly railings.

These kinds of complaints have become more and more common in recent months, according to lawyers and engineers who represent owners of sleek new condominium units across the city.

They say the wave of development in New York City that started in 2004 and crested in mid-2007 has resulted in a wave of accusations about defective construction and building design.

“There’s always an underlying number of lawsuits about defects,” said Stuart M. Saft, a real estate lawyer and the chairman of the Council of New York Cooperatives and Condominiums, “but about a year ago the number started to increase. And over the next two years there’s going to be an explosion, because of all the buildings that were built at about the same time.”

He noted that buildingwide problems often don’t become apparent until people have lived in a building for a while. Legal action is often delayed because sponsors typically control a condo board for a year or more after a building opens and can block attempts by residents to file complaints.

But since condo owners have a three-year statute of limitations for suing a developer or construction contractors for negligence, many people who moved into new buildings in 2007 — when about 7,000 condos came on the market — are realizing that they will soon run out of time.

A negligence lawsuit charges a sponsor or contractor with causing harm or damage to condo owners. If the owners believe a written agreement has been violated, another legal strategy is to sue a sponsor for breach of contract. The statute of limitations for breach of contract is six years.

Lawyers at several firms said that the volume of condo defect work had doubled in the last year, adding up to dozens of buildings with construction problems. In most cases, the condo owners hire lawyers to add muscle to their complaints, in the hope of getting the necessary work done. In a few instances they have filed suits. Lawyers say that condo owners are reluctant to talk about the defects in their buildings, fearful that publicity will decrease the value of their properties.

Water leaks and climate control problems top the list of complaints. Many of the recently built glass towers are especially prone to temperature issues, because air-conditioning units are too small to combat the punishing summer sun, and heating systems can’t make up for a lack of insulation during the cold months.

But lawyers and engineers said that they had also come across buildings with more serious defects that violate the city’s building code. The most common code violation involves inadequate fire-stopping components — building materials that are used to fill empty spaces where fire or smoke can spread between floors and apartments.

Howard L. Zimmerman, an architect whose firm is checking about 35 new condo buildings for construction problems, said that his workers had found fire-stopping violations in about a third. He said his firm has clients in buildings of five to 300 units, throughout Manhattan and in Brooklyn and Queens.

According to Mr. Zimmerman, the most common problem is found behind the walls of apartments, where, say, no caulking material has been used to seal a two-inch space between a pipe and a concrete wall. That unsealed space, he said, “is where smoke and fire can travel quickly,” and it could also allow smells to float through a building. “Odor migration has been a tremendous problem, and if you buy a $3 million apartment, you probably don’t want to smell your neighbor’s smoking or the restaurant downstairs.”

Mr. Zimmerman says that the Department of Buildings can miss these kinds of lapses because architects or engineers hired by the sponsor are allowed to vouch for certain aspects of construction. “There was supposed to be somebody on the job who signed off that this was all installed before the walls got covered up,” he said. “As nutty as it sounds, just because you have a certificate of occupancy doesn’t mean you have a building that’s code compliant.”

He and real estate lawyers said that even when a condo board discovers building code violations, it is often reluctant to alert city officials because the board then becomes responsible for correcting the problem as well as for paying any fines.

James P. Colgate, an assistant commissioner at the Department of Buildings, says that condo boards are not under any obligation to report code violations. But when they do, the department may decide to investigate whether an engineer or architect improperly certified work at the building.

As for problems like water leaks, Mr. Colgate said that a certificate of occupancy was not the same thing as a guarantee. Such a document “certifies that the building is substantially in compliance with rules governing its construction,” he said, “and even if workmanship in a building may not be superb and you get those kinds of issues, the building might still be in compliance.”

When a building is clearly out of compliance, talk quickly turns to lawsuits.

Steven D. Sladkus, a real estate lawyer at Wolf Haldenstein Adler Freeman & Herz, said that he represents an Upper East Side building where the developer put only one layer of wallboard between the floors, instead of the two layers required by city code to create a fire-resistant barrier. “The board knows that’s a serious code violation, and it’s prepared to do the work and sue the developer and hope for reimbursement,” he said.

Mr. Sladkus said that the board hoped that the New York State attorney general’s office, which oversees condominium offering plans, would press the sponsor to do the work.

It will be expensive and disruptive, he added, since contractors will have to remove ceilings and recessed lighting to install the fire-stopping materials.

At the Slate Condominium, a 12-story glass-walled tower in Chelsea where in 2007 one-bedroom apartments sold for as much as $1.4 million and two-bedrooms for as much as $1.9 million, the condo board filed a lawsuit in March accusing the sponsor, Chelsea Luxury Condos, of using defective materials and of not living up to promises made in the offering plan.

“The unit owners have not only personally observed a number of defective and unsafe conditions in the building, but they have suffered a plethora of dangerous conditions,” the suit states. The complaint lists incomplete fire-stopping in hallways, and uneven floors and water damage in various places. Problems common to individual units include warped floors and balcony doors, nonworking electrical outlets, rusted kitchen faucets and water leaks.

Most people moved into the 26-unit building in 2007, and the apartment owners took control of the condo board in April 2008. Debra Guzov, the lawyer representing the condo board, would not comment on the case.

Anna A. Higgins, the lawyer representing the sponsor, said the sponsor had hired its own engineer to inspect the building, and “our position is that the problems listed are mostly punch-list items and are not considered defects, but things that are under warranty and therefore the responsibility of the subcontractors.”

The sponsor has, in turn, brought several of its building and electrical contractors into the suit as third-party defendants, charging they were negligent. “This is a reputable building and company,” Ms. Higgins added. “And they take these matters very seriously.”

The sheer volume of new buildings that went up during the condo construction boom is the main reason for the increase in defective buildings, lawyers and engineers said.

“It happens in every cycle,” Mr. Saft said. “At the beginning of the cycle, workers are underemployed, then suddenly they’re busy, and at the height, there are too many projects and not enough workers. Then what happens is shoddy workmanship, and when you have sponsors running out of money, they start to cut corners.”

Andrew P. Brucker, a real estate lawyer with the New York law firm of Schechter & Brucker, said that the boom had prompted people with no experience in real estate to start building condos. “When the market was hot,” he said, “anybody who had a couple bucks suddenly became a developer, thinking they’d get rich. When the market was strong, if you complained about something, sponsors would fix it, but then the market started to tank and brand-new buildings aren’t selling out, so there’s no money to do that anymore.”

The more unusual problems that Mr. Brucker has encountered include a building whose developer built an illegal pool and another whose developer put the building’s electrical system in a closet inside an apartment. The pool, he said, was never approved by the Buildings Department and may have to be removed. The electrical closet may also be illegal, because it may not be easily accessible in an emergency. In both cases, the solutions will entail costly projects.

When it becomes clear that a building has problems that go beyond punch-list items — a kitchen drawer, say, that won’t stay shut or a closet door that sticks — the first thing owners should do is hire an engineer.

“You have to get a top-to-bottom assessment of the building — the interior, the exterior, all the systems,” Mr. Sladkus said. “That creates a record and tells the board where things stand.”

The sooner this is done, the better, he added, because it takes away a sponsor’s potential claim that problems were caused by the apartment owners. Depending on the size of the building, an engineering report could cost $10,000 to $50,000.

Filing a lawsuit is usually a last resort because it can be costly and take years to resolve. Lawyers say the condo board’s first course of action should be to try to negotiate with the sponsor, with a goal of having the sponsor make the repairs or pay a settlement to get the work done.

If that fails, lawyers said, a condo board can file a complaint with the attorney general’s office, which can help to mediate a dispute and press developers to make repairs. The office can, but rarely does, file its own lawsuit against a developer. But lawyers say that the attorney general has been inundated with complaints; it can take months just to find out if the office will take on a building’s case.

“The attorney general will look at life, health and safety issues and things like whether a temporary certificate of occupancy is current,” said Jeffrey S. Reich, another real estate lawyer at Wolf Haldenstein. “But it’s hard to get them motivated to roll up their sleeves on minor issues.”

Lawyers believe that the attorney general’s office is more likely to act on behalf of smaller buildings, because it recognizes that litigation could be prohibitively costly for buildings with relatively few unit owners.

That presumption is well illustrated by one case in which Mr. Reich represents the owners in a large luxury building that he had hoped the attorney general would see to. But, he said, “the sponsor’s attorney went to the attorney general and said they should not take the case because the apartments are larger than regulation basketball courts and the owners are titans of finance who are fully capable of pursuing it in court.”

Mr. Reich said he was able to persuade the office to keep pursuing the complaint only because an aspect of law was involved that could not be addressed in court because it fell under the attorney general’s jurisdiction.

A spokeswoman for the attorney general encouraged condo owners facing building problems to contact the office’s real estate finance bureau.

The attorney general’s Web site states that when the office receives a written complaint about a building, “we usually demand that the sponsor provide a written response to the allegations. Sometimes, this alone causes the sponsor to repair the defects.”

If that fails, the site states, the office may send its own engineers to inspect the property or have the two sides jointly hire an engineer or architect to evaluate the building and suggest solutions.

Sometimes, even when an early settlement offers the promise of resolution, unit owners still end up in court.

At the Broadway Arms, a 12-unit building that opened in Williamsburg, Brooklyn, in late 2004, the owners took control of the condo board fairly quickly. When they noticed the leaking roofs, shoddy balcony railings and a faulty ventilation system in 2005, they hired an engineer to review the building.

By July 2006, the condo board had reached an agreement with the sponsor, Broadway Driggs Associates, to fix many of the problems the engineer had found. But Alan Winkler, the condo board’s lawyer, said that the work was never completed and that the board decided to sue the sponsor in late 2008 for failing to live up to the offering plan and the settlement agreement.

Mr. Winkler said that the sponsor had repaired the balconies and done some work on the building’s upper roof, but that a lower roof still had leaks, and various problems persisted in the common areas. “At this point,” he said, “there shouldn’t be any contention as to whether this work needs to be done.”

The sponsor denied the charges in court filings and has accused its building contractor of walking off the job. The contractor in turn has denied that in court papers and has claimed that the sponsor owes him $200,000.

Charles L. Mester, the sponsor’s lawyer, said, “A lot of the problems were fixed and it’s just an opinion of some other experts that what was done should have been done another way.” He added that the $200,000 figure “has no basis in anything.”

Five years after they moved into the building, the owners “would like to resolve this quickly,” Mr. Winkler said. “But they want to make sure they get the value they were promised for their units when they bought it.”

Copyright 2009 The New York Times Company

Monday, October 12, 2009

ARC Guidelines for HOA's

In July 2007 the Legislature modified the requirements for enforcable ARC guidelines: I have a video explaining the issue , click here.

This from a California court:

Member Must Pay Association's Attorney Fees

Facts: A member obtained the approval of the association to build a house, a retaining wall, and a barn on his lot located in the community. The governing documents require that work on any construction projects must be completed within a year of approval. Even so, two years after approval, the member still had not begun construction of the house, and the association gave the member notice that it would begin mediation proceedings to resolve the construction delays. The member did not heed the notices, the mediation proceedings fell through, and the association sued the member, requesting an injunction to require him to stop construction on the improvements on his lot and to substantially build the house within the year. The association requested further that if the member did not substantially build the house within the year, then the association would have access to the member's property and would be able to tear down the improvements on his lot.

The trial court, in its ruling, provided specific deadlines for the member to meet. If the member did not meet these deadlines, the association was allowed to come onto the property and demolish the half-completed structures. The court also awarded attorney fees to the association. These orders were made pursuant to California state law, which states that in an action to enforce governing documents, the prevailing party shall be awarded its attorney fees. Because the association did not receive the exact injunction it requested, the member appealed the attorney fee award.

Ruling: A California appeals court agreed with the lower court's decision to award the association with attorney's fees.

Reasoning: The appeals court ruled that the trial court's ruling embodied the association's “main” litigation objective. The association clearly received a more favorable judgment at trial, one that contemplated demolition. And the court stated that even after the modified injunction, demolition of the member's structures remained a substantial possibility.

My Take: members always almost always take the position that "It's better to ask for forgiveness than permission" and argue that an order requiring removal of an improperly built home constitutes "economic waste" I beg to differ; if you want enforceable requirements, get squared away ASAP with your policy under the law, set objective standards, and enforce them...REMEMBER: there is no such thing as "ugly" any more....

Insurance Company not required to defend personal injury suit

This from my friends at Community Association Management Insider

This must have been a horribly maintained" pool....

Facts: A member was injured as a result of exposure to unsafe sanitary conditions in the community swimming pool. Specifically, the member contracted a viral infection from contaminants in the swimming pool's water. The viral infection was identified as the coxsackie virus, which was contracted from ingesting the community's swimming pool water. According to an expert's report, proper chlorination of swimming pool water is an effective way to kill harmful microbes, including the virus that caused the member's injury.

The member sued the association for damages, and the insurer then asked a judge for a ruling without a trial stating that it had no duty to defend the association against the member's lawsuit. The insurer relied on the language of the association's policy. The policy contained a pollution exclusion that stated that the insurance did not apply to “bodily injury which would not have occurred but for the discharge release or escape of pollutants at any time.” The policy defined “pollutant” to mean any solid, liquid, gaseous contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.

Ruling: The Florida district court granted the insurer's request for a judgment without a trial in its favor.

Reasoning: As defined under the plain language of the policy, the meaning of the term pollutant includes contaminant. And the court stated that cases from its jurisdiction have ruled that similar pollutant clauses encompass microbes such as the ones that injured the member. The evidence showed that the substance in the swimming pool was a viral contaminant and a harmful microbe. Therefore, the pollutant exclusion applied in this case.

First Specialty Ins. Corp. v. GRS Mgmt. Assocs., August 2009

Tuesday, October 6, 2009

Some sanity in foreclosures

We have often been before judges who have "compassion" for "the little guy" when foreclosures take place; often these become situations where "helping " one person burdens others who actually are responsible and pay. Here's what the Third District Court of Appeal had to say about one trial judge who wanted to show "compassion"...emphasis is mine...

Third District Court of Appeal
State of Florida, July Term, A.D. 2009
Opinion filed September 30, 2009.
Not final until disposition of timely filed motion for rehearing.
No. 3D09-2405
Lower Tribunal No. 08-7159
Republic Federal Bank, N.A.,
Joseph M. Doyle and Blanca Alicia Doyle,
On Petition for Writ of Certiorari to the Circuit Court for Miami-Dade
County, Valerie Manno Schurr, Judge.
Carlton Fields and Matthew J. Conigliaro (St. Petersburg) and Charles M.
Rosenberg, for petitioner.
Barry L. Simons, for respondents.
Before GERSTEN and LAGOA, JJ., and SCHWARTZ, Senior Judge.
SCHWARTZ, Senior Judge.

We treat the petition for writ of mandamus as one for certiorari and deny the

Following a November 4, 2008 final judgment of foreclosure, and after
several delays – caused in part by the filing and the dismissal of a frivolous
bankruptcy petition on the eve of a previous sale and a foul-up or two in the clerk’s
office – the trial court on July 29, 2009, entered an order fixing August 27, 2009,
as the date of the sale. On motion of the defendants, however, apparently on the
basis that in the case, like this one, of the foreclosure of a residence she routinely
grants continuances of the sale rather than see “anybody lose their house,” the trial
judge granted a continuance until October 1, 2009. fn.1

We deny the petition.

Although granting continuances and postponements are, generally speaking,
within the discretion of the trial court, the “ground” of benevolence and

fn. 1 The court’s remarks on the issue included the following:
I was trying to make everybody happy.
. . . .
We have so many foreclosures here and I give
continuances on these sales. I just do.
. . . .
Unless it is so abundantly clear to me that it is just an
abuse of the process, I give extensions on these because I
don’t want anybody to lose their house. If there is any
chance that he can do this deal, get the money and try to
save this home, you know, people are having a hard time
now. They are having a difficult time. Everybody
knows it. Businesses are failing. People are losing
money in the stock market. You know, unemployment is
high. It’s just everybody knows that we are in a bad time
right now and I hate to see anybody lose their home.

compassion fn.2 (or the claim asserted below that the defendants might be able to
arrange a sale of the property during the extended period until the sale) does not
constitute a lawful, cognizable basis for granting relief to one side to the detriment
of the other, and thus cannot support the order below: no judicial action of any
kind can rest on such a foundation. This is particularly true here because the order
contravenes the terms of the statute that a sale is to be conducted “not less than 20
days or more than 35 days after the date” of the order or judgment. § 45.031(1)(a),
Fla. Stat. (2008). See also Kosoy Kendall Assocs., LLC v. Los Latinos Restaurant,
Inc., 10 So. 3d 1168 (Fla. 3d DCA 2009); Comcoa, Inc. v. Coe, 587 So. 2d 474
(Fla. 3d DCA 1991).

The continuance thus constitutes an abuse of discretion in the most basic
sense of that term. As the Court stated in Canakaris v. Canakaris, 382 So. 2d 1197,
1203 (Fla. 1980):
The trial courts' discretionary power was never intended
to be exercised in accordance with whim or caprice of the
judge nor in an inconsistent manner. Judges dealing with
cases essentially alike should reach the same result.
Different results reached from substantially the same
facts comport with neither logic nor reasonableness. In
this regard, we note the cautionary words of Justice
Cardozo concerning the discretionary power of judges:
The judge, even when he is free, is still not
wholly free. He is not to innovate at
pleasure. He is not a knight-errant roaming
at will in pursuit of his own ideal of beauty

fn. 2 See also the term referred to in Cooper v. Brickell Bayview Real Estate, Inc. 711
So. 2d 258, 258 n.1 (Fla. 3d DCA 1998).

or of goodness. He is to draw his inspiration
from consecrated principles. He is not to
yield to spasmodic sentiment, to vague and
unregulated benevolence. He is to exercise a
discretion informed by tradition, methodized
by analogy, disciplined by system, and
subordinated to “the primordial necessity of
order in the social life.” Wide enough in all
conscience is the field of discretion that
B. Cardozo, The Nature of the Judicial
Process 141 (1921).

See Storm v. Allied Universal Corp., 842 So. 2d 245, 246 n.2 (Fla. 3d DCA 2003)
(trial judge refused to preclude plaintiff, who misled and deceived the defendants,
the jury and the trial court, from further litigation “to give the Plaintiff the break of
his life”); Arango v. Arango, 450 So. 2d 583 (Fla. 3d DCA 1984) (trial judge
reduced attorney’s fee award to spouse of attorney on ground of “professional
courtesy”). See also Flagler v. Flagler, 94 So. 2d 592, 594 (Fla. 1957) (“[C]ourts
of equity have [no] right or power under the law of Florida to issue such order it
considers to be in the best interest of ‘social justice’ at the particular moment
without regard to established law.”); Nordberg v. Green, 638 So. 2d 91 (Fla. 3d
DCA 1994) (trial court may not decline to follow controlling law on ground it
considers its application "inequitable" in particular case), review denied, 649 So.
2d 233 (Fla. 1994).

Although we thus thoroughly disapprove of the order, in view of the fact
that the postponed sale is due to take place within a few days of this decision, no
useful purpose will be served by formally quashing the order or ordering the sale to
take place on an earlier date with all the procedural complications which would
then result. For that reason alone, relief will be denied. We do emphasize that
there are to be no further postponements of the sale.

Petition denied.

Friday, September 25, 2009

Aas usual Israel gets no credit...

As seen in

COUNTER-TERRORISM: No Credit Where Credit Is Due

September 25, 2009: For political, diplomatic and anti-Semitic reasons, it's not likely that the Israelis will get the credit they deserve for the defeat of Islamic terrorist groups throughout the world. But it was Israeli concepts and tactics that helped bring Iraq IED (roadside bomb) casualties down from a high of 84 a month in May of 2007, to a low of 9 in May of 2008. While the new armored vehicles (MRAPs) and other technology (jammers and UAVs) played a role, it was the Israeli concept of going for the brains behind the bombs, that tore the heart out of the Islamic terrorist organizations in Iraq. The same approach is being used successfully elsewhere, from Somalia, to Saudi Arabia, to Afghanistan and on to the Philippines and Indonesia. Islamic nations tend to credit the United States (if they credit any foreigners at all) for these successful tactics. But it was Israel that pioneered this approach, and made it clear that it worked, and how.
The armed forces of the U.S. and Israel have long worked together, to exchange tactics, techniques and technology. One of the items the Israelis shared was the tactics they developed to defeat a Palestinian suicide bombing campaign that began in 2000 (after Palestinian radicals refused to accept a recently negotiated peace deal).
The Palestinian terrorist groups still say they are going to destroy Israel. But as a practical matter, the current round of Palestinian terrorist violence is over. You can see this by the sharp decline in successful terrorist attacks, and the frequent pronouncements from the terrorists groups that they are going to behave, for a while anyway. What the terrorists really want is to avoid any more of the Israeli tactics that shut down their terrorist operations. This included going after terrorist leaders and technical specialists, and either capturing or (failing that) killing them. Raids and air attacks were made against buildings used by the terrorists, and tight security on Israelis borders were instituted. This last measure crushed the Palestinian economy, which put popular pressure on the terrorists to stop their attacks, and promise to keep it that way.
The Israelis also set up an increasingly effective intelligence system inside Palestinian territories. What the Israelis basically did was "take the war to the enemy." This is an application of the old maxim, "the best defense is a good offense." This particular war is still going on, but the Israelis only adopted their winning tactics in 2003 and two years later the terrorists were rendered largely ineffective.
Egypt and Algeria defeated Islamic terrorists during the 1990s using traditional methods (attacking everything in sight), and it took longer and was bloodier. The Egyptians defeated the Moslem Brotherhood (and the survivors fled to help found al Qaeda). Algeria finally defeated a similar movement only in the past year, the Egyptian campaign took most of the decade. Syria crushed the Moslem Brotherhood in the early 1980s, after five years of violence. These three Arab nations are all police states, and were able to deploy large numbers of police and soldiers that spoke the same language as the terrorists. Israel also had a large number of terrorists who spoke Arabic. Many had grown up in Arab countries, or had parents who had done so. What all these successful campaigns had in common was aggressive tactics that took the battle to the enemy.
For the rest of the world, treating terrorism as if it were just a police matter, allowed the terrorists to continue building support, and the ability to launch more attacks. But by going into the terrorist neighborhoods, you disrupt their planning and recruiting efforts, and eventually destroy the network of support. The United States clung to the police approach throughout the 1990s, and the attacks continued. Only after September 11, 2001, was the war carried to the terrorist heartland, and the attacks in the U.S., and against American targets elsewhere, ceased. The terrorists were forced to defend their base, and in doing so they killed many Moslems, and turned Moslem public opinion against them.
But going into Iraq worked a lot more effectively when the Israeli tactics were applied. This not only killed or captured key terrorist leaders and technicians, but demoralized many potential Islamic terrorists. Al Qaeda was exposed as a bunch of remorseless murderers who enthusiastically killed Moslems as well as infidels (non-Moslems). That cost al Qaeda their public support in the Moslem world, while the Israeli tactics cost al Qaeda its key people.

Wednesday, September 23, 2009

New rules make it harder to finance condos

From the Sun Sentinel:

Associations should check whether their properties are approved

It may be a buyer's market for those looking to purchase a South Florida condominium, but a new FHA rule putting an end to "spot approvals" for home loans may burst the shopping bubble and make it much more difficult to qualify for a loan.

By extension, the same rule may also mean more bad news for condo sellers, already suffering through a bad economy which has sent property values into the Dumpster, since it impedes buyers' ability to purchase. And the financial pain could eventually spread to all Florida homeowners by way of higher property taxes, say experts.

What is happening: Beginning Nov. 1, a new Federal Housing Administration rule goes into effect that disallows a loan process called "spot approvals," which gave loan underwriters the authority to approve individual units rather than an entire building.

The reason such authority was so helpful to buyers is the cost and paperwork for a condo association to get an entire building approved by the FHA is onerous at best, costing tens of thousands of dollars for appraisals, structural engineering reports and other reports.

Spot approvals, in comparison, only require an association representative to spend 15 minutes filling out a single-page form. Those loans are prized by buyers because they generally have lower interest rates and require much lower down payments, about 3.5 percent of the purchase price compared with conventional bank loans, which may require up to 30 percent down.

Now, without spot approvals, condo buyers and owners will not be able to get an FHA loan for units in a non-approved building and will have to rely on conventional bank loans or pay cash, said Theresa M. Schmitz, a senior underwriter for Amerifirst in Fort Lauderdale.

"This poses a potential downward trend in condo values because many people can't afford to put such a large down payment down on a condo," Schmitz said. "And if there is a smaller pool of buyers, the market value of condos will decline even further and a condo unit will only be worth what a cash buyer is willing to pay for it."

Ripple effect: It also stands to compound the current real estate market problems that have caused cities to raise tax rates, Schmitz said. "Single family homeowners may think this doesn't affect them, but indirectly it will. When the condo assessed valuations plummet, our collective tax base will decline. Single family homeowners will pick up the slack with a hike in the millage rates and property taxes."

What you can do: Board members should check the federal Housing and Urban Development (the department that oversees the FHA) website to determine whether their condominium complex is on HUD's approved list.

Daniel Vasquez can be reached at or 954-356-4219 (Broward County) or 561-243-6686 (Palm Beach County). His condo column runs every Wednesday in the Local section and Check out Daniel's Condos & HOAs blog for news, information and tips related to life in community associations at You can also read his consumer column every Monday in Your Money and at The Sun Sentinel is hosting a Condos & HOAs Town Hall meeting on Oct. 29 at Nova Southeastern University. Submit a question for our panel of experts online at

Green shoots in real estate? How about record delinquencies!

If you watch the news or read the paper, both of whom depend on developers and real estate agents for advertising, you hear about the real estate market "bottoming out." While that may be true in Nashville, Fargo, or Charlotte, it is not the case here in Florida where the mortgage foreclosures keep coming in, up to 30 a day. Here is a tidbit from Reuters on mortgage delinquencies hitting a record high...

NEW YORK (Reuters) - High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc credit bureau showed on Monday.

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.

The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.

The results, which correlate with consumer bankruptcy filings, suggest U.S. homeowners remain under financial stress despite signs of improving sentiment and fundamentals in the U.S. housing market.

August bankruptcy filings were up 32 percent from a year earlier, compared with a 35 percent year-over-year increase in July.

Still, while more Americans were late with mortgage payments, they are keeping up with other bills. The proportion of credit card accounts at least 60 days past due was down in August for the third straight month, while subprime card delinquencies also fell.

That improvement in delinquency rates partly reflects risk-aversion among issuers, which have cut the number of cards by 82 million, or 19 percent, over the past year, while slashing credit limits by $721 billion, to about $3.6 trillion.

The number of new cards being issued is down even more dramatically. In June, 2.6 million new cards were issued, compared with 4.7 million a year earlier.

Lenders are increasingly targeting consumers with high credit scores, Equifax found. While in 2007, about one in five new cards went to people with a credit score above 760, such consumers account for two in five new cards in 2009. Equifax found similar trends in auto loans.

"The data from August further confirms that we're witnessing a dramatic change in consumer habits," said Dann Adams, president of Equifax's Consumer Information Solutions group.

Total consumer debt is down more than $300 billion, or almost 3 percent, from its peak in September 2008, Adams said, while the savings rate is nearing 5 percent, "a level we haven't seen in years."

Friday, August 28, 2009

Cancellation of Cable Contracts made by Developers

My thanks to Terry Delahunty, a law school classmate of mine for the following. Go Gators!

An important Florida Appellate Court decision was issued Wednesday upholding the ability of a condominium association to terminate a cable agreement entered by the developer prior to turnover. Several trial courts have previously held that a condo association could use Section 718.302, Florida Statutes, to terminate a cable agreement entered by the developer prior to turnover of the condominium association to residents. Section 718.302, provides in pertinent part: "any contract made by an association prior to assumption of control of the association by unit owners other than the developer, that provides for the operation, maintenance, or management of a condominium association or property serving the unit owners of a condominium shall be fair and reasonable, and such grant, reservation, or contract may be cancelled by unit owners other than the developer: (a) ... by concurrence of the owners of not less than 75% of the voting interests other than the voting interests owned by the developer..."

In Comcast of Florida, L.P. vs. L'Ambiance Beach Condominium Association, Inc., No. 4D08-2326 (FL 4th DCA August 26, 2009), the District Court of Appeals for the Fourth District affirmed a Broward County Court decision finding that a condominium association could rely on Section 718.302 to terminate a cable agreement entered by the developer prior to turnover upon more than 75% of the unit owners voting to cancel the agreement. Comcast had argued that cable agreements are not for the "operation, maintenance, or management" of the association or property serving the unit owners and thus, 718.302 did not apply. Comcast also argued that Section 718.115(d), which provides expressly for terminating cable agreements at the next regular or special meeting after they are entered, should apply. The court rejected Comcast's arguments.

It is our understanding that this is the first appellate court decision in Florida upholding this application of Section 718.302, and thus, becomes a stronger state-wide precedent. Based on this decision, many condo associations will most likely try to get out of many current cable TV agreements, and cable operators and

developers may change their form agreements and business practices relating to entering into such agreements.

Foot dragging by foreclosing lenders

This emphasizes my mantra to act quickly, always, but even more so now....

Postponing the Day of Reckoning

By Kate Berry, American Banker

August 26, 2009

Pick up just about any city's newspaper or turn on any news show, and if the topic is real estate, the banking industry is likely being lambasted for foreclosing on troubled homeowners.

But industry data and anecdotal evidence suggest banks and servicers have been dragging out the process – not rushing to kick people out of their homes.

Granted, the deferrals may not be motivated by compassion, or even political pressure. Rather, banks and mortgage investors want to avoid repossessing hundreds of thousands of homes, which would produce losses and hits to capital.

"The goal is to hold off on foreclosures and take losses as slowly as possible to keep balance sheets up," said Deborah Voelz, the chief financial officer of National Asset Direct Inc., a New York buyer and servicer of distressed loans. "Everyone is looking at what the ultimate loss is going to be and whether it makes sense to hold off another year or two and mitigate the results."

The foreclosure process -- and it is a process -- now takes, on average, 18 months to two years, up from 15 months a year ago, according to Amherst Securities Group LP. Backlogs in county courts and at servicing companies, along with local government moratoriums, have contributed to the delays. But plenty of signs indicate that the mortgage companies themselves are in no hurry to seize their collateral.

Rick Sharga, a senior vice president at RealtyTrac Inc., an Irvine, Calif., company that monitors foreclosure filings, said banks often start proceedings but then decide "they don't want the property" and suspend the process indefinitely.

Of the 2.3 million homes that received foreclosure notices last year, one-third had been repossessed by yearend, according to RealtyTrac.

Banks also "are allowing borrowers to be delinquent for longer and longer periods of time before initiating foreclosures," Sharga said.

Tom Booker, a senior vice president in the default information unit at First American Corp. in Santa Ana, Calif., concurred. "There are borrowers who are six or eight months in default; they may have exhausted their workout options; but they're put on a forbearance plan because it's an interim to a final resolution, which is foreclosure," he said. "Banks don't want to take the losses now."