Friday, January 30, 2009

Comply with the FDCPA when you collect!!!

Several years ago, the collection of unpaid condominium association assessments was relatively simple. The procedure to collect remained the same, but with values rising by 2% per month or more, condominium associations who had to go through the foreclosure process, which occurred about 40 times (!) less often than they do now, were paid in full even at the sale, due to the rising price environment.

It has come to my attention that in this declining price environment, some management companies are adding certain fees to offset their internal costs of bookkeeping. I understand the problem that Community Association Managers face. In these unprecedented times, the cost of additional bookkeeping puts a strain on their budget, and the company has somewhat of a “no-win” choice: either find a way to isolate the costs of the extra bookkeeping, such as adding an “actual cost” into the 45-day initial demand letter in the homeowner association setting, (as allowed by law, at least for the time being) or force a rise in the basic management fee, thereby punishing the people who pay for the costs incurred by the people who don’t pay.

The problem arises when those management companies, or the attorneys who represent the associations, attempt to collect an additional fee or cost from the delinquent owner through the demand process. In my opinion, that is a violation of the Fair Debt Collections Practices Act (the “Act”). The Act provides that a debtor is only obligated to pay for debts that he/she legally contracts to pay. In the case of a Condominium Association, the legal contract and agreement thereto is the Declaration of Condominium and the Condominium Documents. Additionally, state law may allow imposition of other costs (the “actual costs” for HOAs, as referred to above).

In the condominium setting, however, there is no authority either under state law, the Act, or the documents to segregate a separate cost and impose that cost against debtors. Make no mistake; the issue is not whether the associations and their managers have the legal right to agree, by contract, for the association to pay the management company additional fees to pay for the costs of keeping track of delinquent owners. That is a matter of contract between the association and the management company. It is perfectly legal to charge an association, say $25 per delinquent owner. That is is a cost of the contract shared by all owners. The problem arises because neither the association, nor the management company, nor counsel for the association, can legally require that a unit owner debtor pay those fees.

I have always counseled my clients and their management companies not to ask for those fees when collecting, either in the initial demand sent by the management company or through legal counsel. While this may not create liability for the Associations, I believe it creates extensive potential liability for the lawyers and management companies who do so.

What’s the bottom line? Management companies and lawyers who demand that condominium unit owners pay additional fees and costs other than those allowed by law are exposing themselves to liability, with the result of possibly hundreds or thousands of individual lawsuits being brought against them for an alleged violation of the Act. While there have been some notable class action lawsuits involving the law firm of Katzman and Korr and my former law firm, Becker & Poliakoff, if I was a plaintiff’s lawyer, I would run an ad seeking out people who may have been charged those extra fees and proceed to bring a thousand actions, each on behalf of an individual owner, against entities who violate the law. While I don’t advocate this, and I certainly don’t wish it on any management company or any lawyer, I feel strongly that my clients and their managers should strictly follow legal guidelines for collections. Being aggressive and taking prompt action is one thing; violating federal and state laws is another.

Fannie Mae Piles On

Having helped to create the economy threatening debacle we find ourselves in Fannie Mae (essentially an arm of the federal Government) now decides to make it more expensive to buy a condo.

The Federal National Mortgage Association or Fannie Mae has taken steps to make the cost of purchasing or refinancing a condo more expensive unless the purchase makes a sizable down payment.

With many lenders are already wary of condo loans because of their default rate, Fannie Mae has added a fee of .75 percent of the loan amount of a 30-year fixed mortgage, for borrowers who put down 25 percent of the purchase price or less, effective April 1. In other words, if a condo is priced at $300,000, with a mortgage of $240,000 (a 20 percent down payment), and Fannie Mae will be purchasing the loan from your lender, it will assess the buyer an additional $1,800.

Saturday, January 24, 2009

Regulating political signs

Now that the battles have ended everywhere but in minnesota (isn't it nice for Florida to be OUT of the spotlight?), it is a good idea to take a look at political signs and their regulation in community associations.

Owners may insist that they have "Freeedom of Speech" and they are correct, to a point.  The First ammednment to the United States Constitution prevents THE GOVERNMENT from regulation certain types of speech, political speech having the most protection of all

While government entities can't restrict political speech on private property, homeowner associations are based on contractual agreements among owners to abide by common rules. Therefore, associations aren't bound by rules preventing governments from placing restrictions on political displays.

They are, however, governed by their state's law. In New Jersey, such bans are permitted. In the 2007 case of Committee for a Better Twin Rivers v. Twin Rivers Homeowners Assocication, the New Jersey Supreme Court held that associations could place reasonable limitations on political speech. Twin Rivers had limited signs to one per lawn and one per window and banned the posting of signs on utility poles and natural features within the community. The court found those limitations reasonable.

On the other hand, for example, since 2005 Texas law has prohibited associations from adopting or enforcing rules that prohibit owners from displaying political signs advertising a candidate or ballot initiative on their own property. The law covers the period from 90 days before an election to 10 days after. If a Texas association's governing documents don't ban political signs but only restrict how they're presented (in the ground or in a window) and their number, the association is probably on solid legal ground.

Washington also prevents associations from barring political speech. According to Washington statute, an association's governing documents can't prohibit the outdoor display of political yard signs by owners or residents on their own property before a primary or general election. However, Washington does allow reasonable regulations on the placement and manner of political sign displays.

There is no such protection in Florida. Remember that even if your documents allow your association to ban or regulate political signs, you may run into difficulties enforcing your rules. A McCain for President sign plainly fits the definition of a political sign, but it's arguable whether a peace sign is political. Case in point: In December 2006, a homeowners association in Pagosa Springs, Colo., asked a resident to remove a wreath shaped like a peace sign from her property. The association backed down after negative publicity, but the example highlights the fact that it's hard to decipher what signs even fit the definition of political.

Friday, January 23, 2009

Improper police behavior dismissed as "technicality"

A few years ago, it was fashionable to state that criminals were getting off on a "technicality" like a violation of their rights under the constitution for illegal searches and seizures. The Supreme Court decided a case described by my friend and colleague, Todd Foster, below. It is a bad decision, but that's the kind of Court we get when we elect certain types of presidents......

While recently reading new cases, it occurred to me that you may be interested in new or significant developments in federal criminal law that I come across in my work. With that in mind, I have decided to send occasional emails summarizing interesting new cases from around the country.

Herring v. U.S. The Supreme Court, on January 14, 2009, constricted even further the right to suppress evidence illegally obtained by law enforcement. In this case, the Court held that even though the government conceded the defendant (Herring) had been illegally searched, the evidence would not be suppressed. Twenty five years earlier, in U.S. v. Leon, the Court held that evidence obtained by officers relying on an invalid judicial act need not be suppressed, as there is no deterrent value in punishing the police for relying on a judicial act. In Herring the defendant was illegally arrested on an invalid arrest warrant which the police "negligently" failed to purge from their system. Upon arresting Herring on the invalid warrant, officers found a gun and drugs, which formed the basis of the prosecution. Speaking for the 5-4 majority, Chief Justice Roberts found no deterrent value in suppressing this evidence either, as the negligent act of the police department in failing to clear the warrant was not sufficiently "objectively culpable" to require suppression.

A strong dissent authored by Justice Ginsburg points out that suppression is required to make sure the police act diligently. She argues the civil concepts of respondent superior and tort liability for negligence demonstrate that our system relies upon individuals and entities acting with care, and this ruling does not. She mentions frightening flaws in numerous government databases such as NCIC and the terrorist watch list, and wonders what the impact on individual liberties will be from a rule excusing scrupulous monitoring and updating of such databases.

I think the dissent has it right. Suppression issues involving clearly inadmissible evidence have now become much harder for the defense. When all else fails for the government, the prosecution can now argue that the officer was merely negligent, leaving the burden to the defense to show the wrongful act was done with a wrongful or reckless purpose.

Speaking of unlawful acts, the Court of Appeals for the Ninth Circuit earlier this month upheld the Medicare fraud conviction of a doctor despite the failure of the charging indictment to allege the essential element of willful misconduct and the judge's erroneous charge to the jury that the government need not prove the doctor knew his acts were unlawful. Finding these errors waived or excusable as harmless error, the Court upheld the conviction and the 180-month prison sentence. Might the result have been different had Dr. Awad been charged under a facially valid indictment, and the jury properly instructed? We will not know unless the case is re-heard or taken to the Supreme Court (U.S. v. Awad, No. 06-50578, Op. filed January 12, 2009).

Until next time,


Open season

There used to be a saying that only widows and orphans were safe while the legislature was in session; the past 10 years have vitiated that concept, especially the upcoming Legislature who wants to punish those with the least in the state so the tax cuts given while JEB! was governor are maintained.

Senator Fasano has introduces a condo bill with some interesting changes for your perusal.

Thursday, January 22, 2009

On the other hand, we may be only 1/3 through....

“Credit losses could peak at a level of $3.6 trillion for U.S. institutions,” famous forecaster of doom and gloom Nouriel Roubini said this week, “half of them by banks and broker dealers. If that’s true, it means the U.S. banking system is effectively insolvent, because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Total financial write-downs and losses have now surpassed $1 trillion since the start of this crisis in mid-2007. That’s puts us barely a third of the way though this mess, if you follow Roubini’s logic.

Monday, January 19, 2009

Could this be the bottom?

Centex has just sold a parcel of land it acquired in Palm Beach County for development about it here, you might be surprised!

Sunday, January 18, 2009

Renting/foreclosed properties

It goes without saying that we are in a depression in the multifamily commonly owned property industry in Florida. The price and value of Condo, HOA and other types of property is in the process of reverting to the mean.

Now I am not a fortune teller, as that is contrary to my religion; additionally I have been right for the wrong reasons before and vice versa. All I know is that I saw a half -billion dollars worth of condo projects in Sunny Isles when I was in South Florida for the BCS that has not even been finished yet; they will be finished and sit empty until foreclosed on, and the lender, and then we the people will take the haircut now that all financial losses have been socialized and all profits were, of course, privatized. Prices will continue to tumble for a looooong time, IMHO. Assessments need to be collected more urgently than ever in the midst of this disaster.

What are ongoing associations to do?

Well for one thing, when you amended your documents 3, 4 and 5 years ago to prohibit rentals in the first "x" years of ownership or capped rentals at "x" percent of units, I hope you included a sentence that says "This shall not apply to the association."

I just took over representation of a community in Gibsonton where their lawyer helped them amend LAST JULY and did not place that language in the amendment. Now, I understand as well as anybody why my communities wanted that language; there were so many speculators buying property hat they were in danger of becoming filled with tenants who have little interest in the long term success of the community. However by doing so, the flip side is that in this extremely dangerous market, if the association forecloses and takes title to the property, it will face a political and perhaps a legal problem if it takes title due to a foreclosure and tries to rent pending foreclosure of the first mortgage.

What's the bottom line? No matter what your documents say, the association should aggressively foreclose and take title to units that do not pay. People need to know that they will not hold on to their property for long, and that the association will do everything it can to divest them from title, and rent the unit to recoup some of the lost payments.

That's all I have to say about that....

Monday, January 12, 2009

Dealing with "Prescription Pets"

One of the hottest topics in Community Association Law is the owner who requests to keep a pet as a "Reasonable Accommodation" under the Fair Housing Act. Just because a member requests permission to keep an emotional support animal doesn't mean you have to grant it. Here are some questions you should ask when you get such a request. If the answer to any of these questions is no, you may be entitled to deny the request.

1) Is the member disabled? According to the act, someone is disabled when they have a physical or mental impairment that substantially limits one or more major life activities This determination is not for managers or directors to try and determine on its own. Community association managers and directors are mot experts and therefore aren't qualified to make medical diagnoses. They must instead seek the professional opinion of a health care provider. There are verification forms to do this.

2) Is the animal necessary to enable the member to enjoy his home and the common areas/elementsto the same extent that nondisabled members enjoy their homes? The act says that disabled people are entitled to reasonable accommodations when necessary for them to be able to enjoy their homes to the same extent that nondisabled people enjoy their homes. That doesn't mean the animal must be a medical necessity, or that it have any special training. The reasonable accommodation doesn't have to be therapy, medicine, or something the person couldn't possibly live without, only something that makes it easier for him to deal with the limitations of the disabling conditions. This includes companionship for people with anxiety or depression.

What's more, although many people think the only time the association has to let a member keep an emotional support animal is when the animal is the member's only available option, that's not true. The animal doesn't even have to be the easiest option for the association to be required to allow it. Just because an option that's easier on the association may exist, like taking drugs as opposed to a dog, or a goldfish as opposed to a cat—doesn't mean that the member has to accept that other option.

Courts usually use a balancing test, asking whether the disabled member derives some benefit from keeping the animal and, if so, at what cost to the association and other members.

3) Would letting the disabled member keep the animal impose an undue hardship on the association? Even if the animal would provide some benefit to the disabled member, if it's too expensive, disruptive, or destructive to keep around, the association may be allowed to refuse to make the accommodation. According to the act, the accommodation sought by the disabled member must be reasonable. A dangerous or untrained dog, or one that barks all night and keeps everyone awake, for example, might not be reasonable, and the association could refuse to allow the member to keep it. Also when outside of the home , the association may require that the animal be leashed and/or muzzled may be reasonable under the circumstances of an accommodation.

What to Do When You Get A Request

Here are four steps to take when a member requests permission to keep an emotional support animal.

1) Send a letter to member acknowledging request. When a member requests permission to keep an emotional support animal, send a letter acknowledging the request. Your letter, based on consultation with counsel, should explain the association's policy on reasonable accommodations, including emotional support animals. Specifically, the letter should say that the association complies with all Fair Housing laws and that if a disabled member requests permission to keep an animal, the association will grant the request if it determines that the animal is necessary to allow the member to enjoy his home to the same extent that nondisabled members enjoy their homes. Also, the letter should tell the member that the association will respond to her request within a uniform number, say 15 business days from the date it receives the information it needs to make this determination.

2) Verify the member's disability and need for the animal. Include an Emotional Support Animal Request Verification form for the member to give to his or her health care provider. In the letter, tell the member to sign the Member Release portion of the form and then to have her health care provider complete the rest of it and return it directly to the association.

The verification form tells the health care provider that the member has made a request for an emotional support animal and explain the association's policies regarding such requests. It should tell the provider how the act defines disability and ask whether, in the health care provider's professional opinion, the member is disabled. And it should ask the provider whether the member needs the animal to have an equal opportunity to use and enjoy the community.

The form should also ask the health care provider whether he would be willing to testify in any proceeding related to the member's need for the animal. This lets the provider know that you mean business, and may discourage members' friends in the health care field from writing false letters in support of the request. Show the verification form to your attorney before using it at your community.

3) If health care provider confirms member's disability and need for the animal, grant the request—unless compelling reasons exist to challenge it. Generally, you should accept the diagnosis of any qualified health care professional and allow the member to keep the animal if the professional believes that the member needs it. The health care professional doesn't have to be a doctor. HUD accepts complaints based on the opinions of Ph.D.s, certified social workers, or therapists, among others.

Only in extreme situations should you challenge the health care professional's diagnosis. It's generally recommended that associations not go behind the health care provider's determination or qualifications. If an association decides to reject such a request, it should do so only with an abundance of caution and with the active involvement of its attorney. Every Board should check with your insurance agent to confirm that you have coverage or at least a defense provided by your insurance policy if challenged.

4) Consider community circumstances to decide whether requested accommodation is reasonable. As explained above, an association doesn't have to make any accommodation that's unreasonable—even if the member is disabled and a health care professional verifies that the member needs the animal. Reasonableness always depends on your community's circumstances. The association might have to restrict the type of animal the disabled member can keep. It's important to be in regular communication with the member so that she understands your willingness to work toward any resolution that's reasonable.

If an animal is a nuisance, that is grounds to have the animal removed, regardless of whether it is an otherwise qualified support animal. Make sure that witnesses are willign to testify, and that the behavior is specifically prohibited by the documents or a rule.