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.

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.

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,

Todd

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.

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.

Could this be the bottom?

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