We all know times are tough and most experts predict that full economic recovery is still many months or even years away. What should your community be thinking about right now in terms of saving money, recouping lost money and even making money?Here are some suggestions for you to consider in order to help you better weather the current economic climate:
Tighten Up Your Current Collection Policy
Rethink your traditional collection policy in light of today's economic realities. If your collection policy was to typically send three courtesy demand letters before sending the file off to the attorney for collection, think again. The longer the delay in commencing collection efforts these days, the greater the chance that the delinquency will balloon to an unmanageable size;If your governing documents require three courtesy letters be sent, amend that provision (more about amending your documents below);If you traditionally stopped all collection efforts once a mortgage foreclosure was filed, think again. Many lenders are starting foreclosure actions but taking years to finish them. The reason for this is quite simple; as soon as the bank takes title it must pay the statutorily required past due amounts and start paying assessments from that day forward. For a bank, it is much better to allow you to simply maintain their collateral for them while they pay nothing in to the community;Be aggressive with your foreclosure actions. This accomplishes several things: it sends a message to the rest of the paying members that you are doing something; it warns those who might be tempted to stop paying their assessments that you will do something, it allows the association (once it takes title) to either sell the property or lease it out short term to recoup some or all of the money owed and it allows the association to control who occupies the property and its condition.For more information about the types of collection strategies you should be employing right now, please contact attorney Kathleen Angione with Katzman Garfinkel Rosenbaum via email at kangione@kgrlawfirm.com or by phone at 954-486-7774.
Spend $$'s to Recoup More $$'s
I know the last thing many of you want to think about is spending money right now but sometimes it makes sense to do just that. The first thing you want to do is to make sure that your governing documents provide you with all the right tools to deal with your foreclosure and other issues. The following are some amendments to consider:1. Adding late fees (if you don't already have them) and increasing the amounts you can charge for late fees and interest to the "highest amount permitted by law". Some documents only allow you to charge interest and late fees in amounts much lower than what you can currently charge under the statutes;2. Removing any harmful lien subordination language. Typically, your association lien is only inferior to a first mortgagee's lien or a federal tax lien. However, some governing documents contain harmful language which subordinates your association lien to ALL other lienholders. If you have this language it should be removed in order to allow you to recover more money owed to the association;3. Adding language which would allow the association to specially assess a particular unit or lot for any amounts paid to maintain or secure that unit or lot. This is especially important now when many properties have been abandoned and the association wants to do minimal maintenance and/or change the locks to keep out unwanted occupants;4. In a homeowners' association, you can suspend a delinquent owner's common area use rights and voting rights IF your declaration or bylaws so provide. If you are not taking advantage of this very useful tool to deal with delinquencies you should be;5. Smaller associations should consider amending their documents to restrict multiple unit or lot ownership by any one person or entity. If one individual or entity owns a significant percentage of the units in a small community, that person's financial reversal could spell doom for the association's cash flow. The only downside to this type of amendment right now would be if your community is actually courting bulk purchasers of your units; 6. Add an acceleration of payments clause in the event installments are not timely paid. This gives the association a larger hammer to collect for the whole year which obviously benefits cash flow; and 7. An amendment requiring a uniform lease form or lease addendum to be used whenever a unit or lot owner wishes to lease out their home is very useful right now. Such a uniform lease form or lease addendum would require that the tenant pay rent directly to the association in the event the owner becomes delinquent in the payment of assessments as well as provide the association with eviction rights in the event that the tenant(s) become a nuisance. For more information about the kinds and types of amendments you should consider adding to your governing documents please contact me via email at dberger@kgrlawfirm.com or by phone at 954-315-0372.
Scrutinize Those Contracts!
Now is an excellent time to have your contracts reviewed by legal counsel to determine if (a) those contracts are cancellable at will and (b) whether a better deal can be negotiated. You should be earmarking all contracts coming up for renewal to make sure they do not automatically renew without you first negotiating either a better rate, a different, and perhaps scaled-down, set of services, etc.This is especially true for your cable contract. Many of you have asked whether or not you can simply cut off the cable service to delinquent owners. The answer is that the cable company will not readily do that and you may not be able to do that under the terms of your contract, the statute and/or your governing documents. Instead, you may be able to change from a bulk to a retail contract so only those paying for the services will be able to use them. For more information on your ability to switch your bulk cable contract to a retail contract, please contact Leo Delgado of CSI Associates, Inc. at 954-767-0185 or via email ldelgado@csiassociates.net.Not only should you scrutinize existing contracts but you should be more careful when entering into future contracts. Negotiating the best deal possible will save you money in the long run. If, in the past, you did not feel the need to have your contracts reviewed and you have ever been burned by that practice, please reconsider investing an hour or two of attorney time to ensure you avoid costly mistakes and include language in your contracts that protects your interests. A recent case on point, is a balcony restoration contract that was properly prepared by a member of my Transaction Team to include language that the contractor's contract price included all work necessary to complete the project. This was later found to include the cost to remove individual sunshades from the balconies; a significant savings to the association. Even though you are only required to obtain competitive bids on certain contracts, it is a good business practice in this environment to obtain several bids, if possible, on all contracts of any significance. For more information on best practices when negotiating contracts, please contact my partner, Ken Zeilberger, via email at kzeilberger@kgrlawfirm.com or by phone at 954-486-7774.
Insulate Yourselves From Unnecessary Liability
Now is not the time to make costly and avoidable mistakes. Make sure your association is following proper protocol in terms of association operations to avoid the costs and headaches associated with Division complaints, arbitrations and recalls.Even though you may be looking to cut back on services to save money, do not cut back on essential common area maintenance as it may result in even more costly repair projects.
Periodically check the Association's records with the Secretary of State to ensure that you have filed your annual corporate report and paid your annual fee in order to continue enjoying certain corporate protection from individual liability.Periodically check to see who is authorized to sign your association checks and remove any individuals who are no longer on the board or who are otherwise unauthorized to be signatories. Along those lines, make sure that all persons who control or disburse association funds are properly bonded in an amount that is equal to or greater than the maximum funds that will be in the custody of the association or its management company at any given time.Make sure your association's official books and records are properly organized. Organization is key to avoiding additional stress in already stressful times.
Financial Sense
If you have an association website, it makes sense to encourage as many of your owners to use that site in order to cut down on printing and postage costs associated with notices, copies of the governing documents, etc. If you do not have a website, CAN members are entitled to a free basic association website setup ($75.00 value) or an enhanced setup for $75.00 ($150.00 value), 10% off monthly hosting and licensing fee and a free 30-day trial period with one additional hour of telephone training. For more information, please visit MyCommunityAssociation.com for more information or call Michael Berger at 305-479-6009.It also makes sense to have a line of credit established now before the number of delinquencies in your community rises to a level that makes you ineligible for same. Please make sure to check the CAN site to see which banks are offering you discounts. For example, City National is offering CAN members 1/4% off loan commitment fees and Community Bank of Broward is offering a $500.00 discount off its bank fee for any association loans.Consult with your insurance agent to determine if your insurable value and coverage is correct given the current market conditions.If you are one of the unfortunate few that are still subject to a recreational or land lease on your common areas now might be the time to attempt to buy out that lease. A lump sum might be more attractive to a lessor in this climate than it would have been in years past.Lastly, it makes sense to help your owners who are struggling to stay in their homes. Amerifirst is offering free foreclosure seminars and other useful tips to help your owners regain their financial health, stay in their homes and start paying their association fees once again. Older owners with equity in their units may be able to secure a useful reverse mortgage. Amerifirst is offering CAN members $250.00 off its closing fees on FHA reverse mortgages and FHA secured mortgages. Please contact Terri Schmitz at terri@amerifirstfl.com or by phone at 954-771-6604.
Find Out Who Owes You Money
This is perhaps the most overlooked area by most community associations. The first step in uncovering money that was owed to you but may not have collected is to determine whether or not your community suffered any storm damage over the last 5 years. If you did, you may have left thousands or millions of dollars still owing to you on the table. Insurance companies typically pay cents on the dollar. Combine that with the fact that many boards may have been too intimidated to file claims or were made to believe that their claims did not meet their deductible or that they would be canceled or their rates raised if they did file a claim, and it is not surpising that money was left behind. Perhaps now is the time to get a little bolder about your claim while you still have time left?For more information on your ability to file a claim for past storm damage or other casualty damage, please contact Tisa Christiana at Katzman Garfinkel Rosenbaum via email at tchristiana@kgrlawfirm.com or by phone at 1-800-393-1529.In addition, take a look at any construction defect claims that may still be viable. If a developer owes your community money as a result of construction defects or financial improprieties, now is the time to investigate those claims.Lastly, make sure you own your common areas. Some communities are shocked to find out that the developer never deeded over the swimming pool or clubhouse and that property has been liened and/or taxed at rates other than the nominal rates at which common areas are taxed.
Creative Sources of Ancillary Revenue
This is a perfect time to start thinking about different sources of revenue that might be available to you. This can include leasing out space on your in-house cable and community channels to advertisers as well as selling space on your community association website to businesses interested in advertising to your community. This is especially true of realtors who might be willing to pay you a certain amount each month to advertise on your website or your tv channel.There might also be opportunities to advertise in other high-traffic areas subject to documentary and statutory constraints. In addition, there are still cell phone and broadband companies out there willing to lease your unused rooftop space. For more information about these kinds of opportunities, please contact Corey R. Hayes with MasTec/DirectPlus at 877-534-8201.
According to Jeff Ducker of Kane & Company CPA's, any avenues that the association feels might bring in additional revenue would be worthwhile even considering the potential taxability of such revenue. It is important to remember that there will more than likely be expenses which may be allocated against such revenue to reduce any tax effect. For more information on the potential tax consequences of these kinds of ancillary revenue, please contact Jeff Ducker at jducker@kanecpas.com or by phone at 305-503-1023. I hope this information has given you some food for thought. There are still some clever strategies you can employ to make the best out of a bad situation. I will provide you with emerging strategies in the near future.
Monday, April 06, 2009
Monday, March 30, 2009
How Do We Wind Up With Bad Community Association Bills?
It might be a long time since some of us took a Civics course in school so how familiar are you with the legislative process which impacts you as both a property owner and as a member of your community association?
In Florida, we have a part-time Legislature that meets for a 60-day regular session each year. The regular legislative session starts on the first Tuesday after the first Monday in March each year and continues for 60 days. The regular session ends either in sine die adjournment with the ceremonial dropping of white handkerchiefs by each Chambers' Sergeant at Arms or it ends in an extension of the regular session to complete unfinished work. With the huge budget crisis facing our State, it will not be surprising if this year's regular session is extended.
There are 40 senators and 120 representatives currently making decisions on behalf of Florida's citizens in our State Legislature. The only requirements to be a State Senator or a State Representative are the following:
1. Person must be at least 21 years old;
2. Person must be a resident of the district in which he or she was elected; and
3. Person must have lived in Florida for at least 2 years before running for office.
Currently, a Florida State Senator serves a 4-year term (odd numbered districts' terms of offices are 2 years for seats elected in 2002 due to reapportionment), is limited to two terms and earns a salary of $31,932.00 as of July 1, 2007.A member of Florida's House of Representatives serves a 2-year term, is limited to 4 terms and earns a salary of $31,932.00 as of July 1, 2007. The salary earned by our elected representatives might surprise you especially since the last contested Senate race cost the candidates in excess of $500,000! Now that we have a little bit of the background involved, how do we wind up with the laws, particularly the community association laws, we have?
Each year, every legislator has 6 bill slots. Those legislators file bills as a result of their personal goals or projects, at the behest of a special interest group or after a discussion with constituents like you. Those bills are given numbers and referred to various House and Senate committees. The committee process can be tricky and it is during this process that bills can be killed or drastically modified. If a bill is not favored by House or Senate leadership, it can be referred to numerous committees and never make it out of the committee process. Conversely, favored bills may be referred to just one committee or they may go straight to the House or Senate floor for a vote.
Committee chairs have a lot of say in terms of which bills will be heard in their committees. Of course, politics always plays a role and currently a bill sponsored by a member of the minority party would fare much better if a member of the majority party signs on as a co-sponsor. Even if a bill is lucky enough to make it through the committee process unscathed, that is not a guarantee that the Speaker of the House or the Senate President will send it to the floor for a vote.Each bill needs to pass both chambers to become law so every bill must have a companion bill in the other chamber. If there is no companion bill at the end of the process, there will be no law. Even if a bill (which started out as a discussion between you and your legislator over the summer) passes both chambers and a full floor vote, its battle is not over yet. The governor has veto powers and can kill your bill. Bills can become law with the governor's signature (which is obviously his or her endorsement) or they can become law without the governor's signature.Bills typically take effect immediately upon becoming law or on July 1st or October 1st each year.
If all of this makes you think it is impossible to ever pass good legislation, think again. Legislators want to hear from their constituents. As a member of a community association, you are in good company. There are approximately 52,000 mandatory community associations in the State of Florida. That means millions of Floridians live in these communities and possess untold political clout. The groups that manage to pass legislation each year that is harmful to the successful operation of your communities or which costs you more to live in those communities are betting on one thing: that you cannot rally your troops to make your voices heard. Members of my Community Advocacy Network (CAN) receive quite a bit of information from me throughout the Session about the community association bills being heard in various committees. Please take a moment to read those alerts and mobilize key members of your community to use CAN's Capitol Connection email tool at www.canfl.com to send emails of support or requests for defeat to the committee members hearing these bills. Legislative aides keep a running tally each day of the emails and phone calls they receive in support of a bill or against a bill and they relay those numbers to their legislators. Your emails and calls do make a difference in whether a bill is passed or defeated. Unlike special interest groups, you don't offer the promise of large campaign contributions, you offer the chance for re-election to your representative as a reward for passing positive laws that help rather than hurt you and your communities.
Please take a look at CAN's Legislator Spotlight tab at http://www.canfl.com to see the Florida legislators who have made a commitment to sound community association legislation. If you would like to nominate your Senator or Representative for recognition in this regard, please let me know.
In Florida, we have a part-time Legislature that meets for a 60-day regular session each year. The regular legislative session starts on the first Tuesday after the first Monday in March each year and continues for 60 days. The regular session ends either in sine die adjournment with the ceremonial dropping of white handkerchiefs by each Chambers' Sergeant at Arms or it ends in an extension of the regular session to complete unfinished work. With the huge budget crisis facing our State, it will not be surprising if this year's regular session is extended.
There are 40 senators and 120 representatives currently making decisions on behalf of Florida's citizens in our State Legislature. The only requirements to be a State Senator or a State Representative are the following:
1. Person must be at least 21 years old;
2. Person must be a resident of the district in which he or she was elected; and
3. Person must have lived in Florida for at least 2 years before running for office.
Currently, a Florida State Senator serves a 4-year term (odd numbered districts' terms of offices are 2 years for seats elected in 2002 due to reapportionment), is limited to two terms and earns a salary of $31,932.00 as of July 1, 2007.A member of Florida's House of Representatives serves a 2-year term, is limited to 4 terms and earns a salary of $31,932.00 as of July 1, 2007. The salary earned by our elected representatives might surprise you especially since the last contested Senate race cost the candidates in excess of $500,000! Now that we have a little bit of the background involved, how do we wind up with the laws, particularly the community association laws, we have?
Each year, every legislator has 6 bill slots. Those legislators file bills as a result of their personal goals or projects, at the behest of a special interest group or after a discussion with constituents like you. Those bills are given numbers and referred to various House and Senate committees. The committee process can be tricky and it is during this process that bills can be killed or drastically modified. If a bill is not favored by House or Senate leadership, it can be referred to numerous committees and never make it out of the committee process. Conversely, favored bills may be referred to just one committee or they may go straight to the House or Senate floor for a vote.
Committee chairs have a lot of say in terms of which bills will be heard in their committees. Of course, politics always plays a role and currently a bill sponsored by a member of the minority party would fare much better if a member of the majority party signs on as a co-sponsor. Even if a bill is lucky enough to make it through the committee process unscathed, that is not a guarantee that the Speaker of the House or the Senate President will send it to the floor for a vote.Each bill needs to pass both chambers to become law so every bill must have a companion bill in the other chamber. If there is no companion bill at the end of the process, there will be no law. Even if a bill (which started out as a discussion between you and your legislator over the summer) passes both chambers and a full floor vote, its battle is not over yet. The governor has veto powers and can kill your bill. Bills can become law with the governor's signature (which is obviously his or her endorsement) or they can become law without the governor's signature.Bills typically take effect immediately upon becoming law or on July 1st or October 1st each year.
If all of this makes you think it is impossible to ever pass good legislation, think again. Legislators want to hear from their constituents. As a member of a community association, you are in good company. There are approximately 52,000 mandatory community associations in the State of Florida. That means millions of Floridians live in these communities and possess untold political clout. The groups that manage to pass legislation each year that is harmful to the successful operation of your communities or which costs you more to live in those communities are betting on one thing: that you cannot rally your troops to make your voices heard. Members of my Community Advocacy Network (CAN) receive quite a bit of information from me throughout the Session about the community association bills being heard in various committees. Please take a moment to read those alerts and mobilize key members of your community to use CAN's Capitol Connection email tool at www.canfl.com to send emails of support or requests for defeat to the committee members hearing these bills. Legislative aides keep a running tally each day of the emails and phone calls they receive in support of a bill or against a bill and they relay those numbers to their legislators. Your emails and calls do make a difference in whether a bill is passed or defeated. Unlike special interest groups, you don't offer the promise of large campaign contributions, you offer the chance for re-election to your representative as a reward for passing positive laws that help rather than hurt you and your communities.
Please take a look at CAN's Legislator Spotlight tab at http://www.canfl.com to see the Florida legislators who have made a commitment to sound community association legislation. If you would like to nominate your Senator or Representative for recognition in this regard, please let me know.
Monday, February 09, 2009
Association Financial Problems: Pursuing Unresolved Casualty Claims May Be The Solution
Association Financial Problems: Pursuing Unresolved Casualty Claims May Be The Solution
By: Donna D. Berger, Esq.
If your community is struggling today to meet its financial obligations in light of a growing number of delinquencies, it might be time to revisit the issue of any storm damage that may have impacted you several years ago. Many associations do not readily see the connection between storm damage that hurt them several years ago and their current economic woes but that connection may be closer than you think.
The following hurricanes battered the State of Florida:
Charlie-August 13, 2004;
Frances-September 4, 2004;
Ivan- September 16, 2004;
Jeanne- September 26, 2004;
Katrina- August 24, 2005; and
Wilma- October 25, 2005
Many boards submitted claims for storm damage and were told that their claims did not reach their deductible level. Others received some money from their carriers but not nearly enough to pay for repairs and were forced to specially assess their members for those costs that weren't covered. Incredibly a few associations never even made claims because they either felt they did not meet the deductible or they feared having their coverage canceled or their rates raised. Quite simply, a board of directors cannot accurately assess the amount of damage that a community may have suffered without a thorough inspection by properly trained experts.
For far too many communities, the storms that ravaged Florida in 2004 and 2005 created a hole from which they never dug out. The special assessments that their members were forced to pay for damage that should have been covered by their insurance carriers made them less able to bear the current real estate market conditions.
However, all is not lost for those communities who understand the insurance process and take the time to pursue their rights. Typically you have five (5) years to make a claim with your insurance company after a casualty loss so even the oldest storm claim listed above is STILL RIPE unless your claim was cut short by a FIGA deadline, an appraisal award or a release agreement you signed which specifically used the word "release".
In order to understand whether or not your association walked away from insurance proceeds that were rightfully owed to you it is important to understand how most insurance companies operate. It does not benefit the insurance company's bottom line to make you whole for any claim you may submit so they are hoping you will accept less money than you deserve or they are hoping that you will simply forget that you still have rights to assert a substantial claim for money that you may be owed. It is even better for them if you do not submit a claim at all. The way insurers achieve these goals is to perpetuate the following myths:
1. If you file a claim you will be dropped. This is false. It is illegal under Florida law for insurance companies to drop policyholders for filing claims. Specifically, Section 627.4133(3) provides: "Claims on property insurance policies that are a result of an act of God may not be used as a cause for cancellation or nonrenewal, unless the insurer can demonstrate, by claims frequency or otherwise, that the insured has failed to take action reasonably necessary as requested by the insurer to prevent recurrence of damage to the insured property."
The reality is that if you do not file a claim and the neighboring property files a dozen you both have the same chance of being dropped if your insurance company decides to reduce its exposure in the State. The neighboring property owner, however, at least had the benefit of filing a claim;
2. If you file a claim your insurance rates will go up. Again, this is the same issue as #1. Insurance companies must submit rate increases to the State for approval. Whether or not you make a claim will not impact the carrier's business decision to move forward with a proposed rate increase;
3. Your damage did not come close to exceeding your deductible. This is a common tactic to ensure that policyholders simply give up and pay for insured damage out of their own pockets. Damage visible to the naked eye does not tell the whole story of damage which your personal and real property may have suffered. Trained experts can properly advise you on the full extent of the damage inflicted including structural damage, mold, loss of power, relocation expenses, cleanup and dumpster costs, etc. If your community endured a special assessment to pay for storm damage you may have been on the receiving end of the deductible excuse; and
4. If you already received a check from your insurance company it is too late to revisit your claim. Unless you signed a release, receiving funds alone does not prevent you from pursuing your carrier for the full extent of damage you suffered.
Unfortunately, a volunteer board of directors, is a particularly easy target for the scare tactics outlined above. Many boards simply do not know their rights with regard to casualty claims or are bullied into accepting less than the community, which is ultimately the individual members, deserves.
The statutory deadlines for most of these storm events are nearing. Boards, particularly new ones who were not seated at the time any damage was incurred, would be well advised to have their property inspected as soon as possible in order to provide themselves with the reassurance that they were paid in full by their carrier or to arm themselves with the ammunition needed to recover the amounts still owed.
If you were lucky enough not to suffer any storm damage over the last four tumultuous storm seasons, please keep in mind that every board member bears a fiduciary duty to the membership and that duty includes the proper handling of insurance claims.
Donna D. Berger, Esq. is the Managing Partner of the Ft. Lauderdale Office of Katzman Garfinkel Rosenbaum (KGR) a firm that devotes its practice to the representation of community associations and casualty law. Ms. Berger can be reached at 954-315-0372 or via email at dberger@kgrlawfirm.com.
By: Donna D. Berger, Esq.
If your community is struggling today to meet its financial obligations in light of a growing number of delinquencies, it might be time to revisit the issue of any storm damage that may have impacted you several years ago. Many associations do not readily see the connection between storm damage that hurt them several years ago and their current economic woes but that connection may be closer than you think.
The following hurricanes battered the State of Florida:
Charlie-August 13, 2004;
Frances-September 4, 2004;
Ivan- September 16, 2004;
Jeanne- September 26, 2004;
Katrina- August 24, 2005; and
Wilma- October 25, 2005
Many boards submitted claims for storm damage and were told that their claims did not reach their deductible level. Others received some money from their carriers but not nearly enough to pay for repairs and were forced to specially assess their members for those costs that weren't covered. Incredibly a few associations never even made claims because they either felt they did not meet the deductible or they feared having their coverage canceled or their rates raised. Quite simply, a board of directors cannot accurately assess the amount of damage that a community may have suffered without a thorough inspection by properly trained experts.
For far too many communities, the storms that ravaged Florida in 2004 and 2005 created a hole from which they never dug out. The special assessments that their members were forced to pay for damage that should have been covered by their insurance carriers made them less able to bear the current real estate market conditions.
However, all is not lost for those communities who understand the insurance process and take the time to pursue their rights. Typically you have five (5) years to make a claim with your insurance company after a casualty loss so even the oldest storm claim listed above is STILL RIPE unless your claim was cut short by a FIGA deadline, an appraisal award or a release agreement you signed which specifically used the word "release".
In order to understand whether or not your association walked away from insurance proceeds that were rightfully owed to you it is important to understand how most insurance companies operate. It does not benefit the insurance company's bottom line to make you whole for any claim you may submit so they are hoping you will accept less money than you deserve or they are hoping that you will simply forget that you still have rights to assert a substantial claim for money that you may be owed. It is even better for them if you do not submit a claim at all. The way insurers achieve these goals is to perpetuate the following myths:
1. If you file a claim you will be dropped. This is false. It is illegal under Florida law for insurance companies to drop policyholders for filing claims. Specifically, Section 627.4133(3) provides: "Claims on property insurance policies that are a result of an act of God may not be used as a cause for cancellation or nonrenewal, unless the insurer can demonstrate, by claims frequency or otherwise, that the insured has failed to take action reasonably necessary as requested by the insurer to prevent recurrence of damage to the insured property."
The reality is that if you do not file a claim and the neighboring property files a dozen you both have the same chance of being dropped if your insurance company decides to reduce its exposure in the State. The neighboring property owner, however, at least had the benefit of filing a claim;
2. If you file a claim your insurance rates will go up. Again, this is the same issue as #1. Insurance companies must submit rate increases to the State for approval. Whether or not you make a claim will not impact the carrier's business decision to move forward with a proposed rate increase;
3. Your damage did not come close to exceeding your deductible. This is a common tactic to ensure that policyholders simply give up and pay for insured damage out of their own pockets. Damage visible to the naked eye does not tell the whole story of damage which your personal and real property may have suffered. Trained experts can properly advise you on the full extent of the damage inflicted including structural damage, mold, loss of power, relocation expenses, cleanup and dumpster costs, etc. If your community endured a special assessment to pay for storm damage you may have been on the receiving end of the deductible excuse; and
4. If you already received a check from your insurance company it is too late to revisit your claim. Unless you signed a release, receiving funds alone does not prevent you from pursuing your carrier for the full extent of damage you suffered.
Unfortunately, a volunteer board of directors, is a particularly easy target for the scare tactics outlined above. Many boards simply do not know their rights with regard to casualty claims or are bullied into accepting less than the community, which is ultimately the individual members, deserves.
The statutory deadlines for most of these storm events are nearing. Boards, particularly new ones who were not seated at the time any damage was incurred, would be well advised to have their property inspected as soon as possible in order to provide themselves with the reassurance that they were paid in full by their carrier or to arm themselves with the ammunition needed to recover the amounts still owed.
If you were lucky enough not to suffer any storm damage over the last four tumultuous storm seasons, please keep in mind that every board member bears a fiduciary duty to the membership and that duty includes the proper handling of insurance claims.
Donna D. Berger, Esq. is the Managing Partner of the Ft. Lauderdale Office of Katzman Garfinkel Rosenbaum (KGR) a firm that devotes its practice to the representation of community associations and casualty law. Ms. Berger can be reached at 954-315-0372 or via email at dberger@kgrlawfirm.com.
Tuesday, January 27, 2009
Fannie Mae Makes Life Tougher for Florida's Condo Owners
Florida's condominium owners are being singled out by Fannie Mae for some
tough new lending requirements. Many industry experts believe these new
requirements which became effective on January 15, 2009, will make it even
tougher to sell condominium units in communities that are already struggling
financially.
Fannie Mae does not make home loans directly to consumers but instead works
with mortgage lenders and brokers to ensure that those entities have the
funds needed to lend to home buyers at affordable rates. Fannie Mae-backed
loans typically have the best rates and lowest down payments for borrowers.
Thus, Fannie Mae policies have a tremendous impact on the lending industry.
Fannie Mae's new conditions which apply only to the State of Florida
include:
1. No more than 15% of condominium unit owners can be 30 or more days
delinquent;
2. For new condominiums and condominium conversions, at least 70% of the
units must have been sold or under contract. (Previously the requirement was
only 49%);
3. Fannie Mae will now have in-house underwriting teams extensively review
a condominium's building, its finances and local market conditions. This
review will be at the lender's expense which will make such loans less
attractive. (Previously, Fannie relied on lenders to perform these reviews
and the lenders controlled the costs); and
4. Higher equity will be required up front from non-occupant investor
owners (15% down) and those purchasing a Florida condominium unit as a
second home (10% down).
For the near future, this additional tightening of available credit will
surely impact those struggling to sell their condominium units in Florida.
tough new lending requirements. Many industry experts believe these new
requirements which became effective on January 15, 2009, will make it even
tougher to sell condominium units in communities that are already struggling
financially.
Fannie Mae does not make home loans directly to consumers but instead works
with mortgage lenders and brokers to ensure that those entities have the
funds needed to lend to home buyers at affordable rates. Fannie Mae-backed
loans typically have the best rates and lowest down payments for borrowers.
Thus, Fannie Mae policies have a tremendous impact on the lending industry.
Fannie Mae's new conditions which apply only to the State of Florida
include:
1. No more than 15% of condominium unit owners can be 30 or more days
delinquent;
2. For new condominiums and condominium conversions, at least 70% of the
units must have been sold or under contract. (Previously the requirement was
only 49%);
3. Fannie Mae will now have in-house underwriting teams extensively review
a condominium's building, its finances and local market conditions. This
review will be at the lender's expense which will make such loans less
attractive. (Previously, Fannie relied on lenders to perform these reviews
and the lenders controlled the costs); and
4. Higher equity will be required up front from non-occupant investor
owners (15% down) and those purchasing a Florida condominium unit as a
second home (10% down).
For the near future, this additional tightening of available credit will
surely impact those struggling to sell their condominium units in Florida.
Thursday, February 14, 2008
HAS YOUR COMMUNITY ASSOCIATION BEEN PUT ON A LENDER'S BLACKLIST? By Donna Berger, Esq.
If any of your community members have gotten close to selling units in the past year only to have the closings fail as a result of their potential purchasers being unable to secure financing, the reason could be that your association has been blacklisted by some lenders.
There are several reasons why a building would be deemed undesirable by a lender and many, but not all of them, relate to whether or not the loans meet the standards of Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Mortgage Corp.) and thus, are eligible to be sold on the secondary market. About 70% of a building must be owner-occupied for it to be considered suitable to be sold to Fannie Mae or Freddie Mac.
As such, buildings with heavy concentrations of investor owners might wind up on a lender blacklist.
Other areas that are being scrutinized closely by lenders in this market are the number of delinquencies in a particular community and any ongoing litigation involving boards, unit owners, developers and vendors.
Please click on the following link to view the properties currently blacklisted by Washington Mutual, BankUnited, Popular Mortgage and Citimortgage. Of course, these lists do not represent the totality of blacklisted property in the State of Florida but are only a representative sampling.
http://www.dailybusinessreview.com/images/news_photos/47126/BankUnited.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/WAMU.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/Popular%20mortgage.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/Citimortgage%20questionnaire.pdf
People wishing to purchase in communities that have been blacklisted by institutional lenders will have to resort to "hard-money" lenders, often paying twice the expected interest rate on shorter terms and with a requirement for a much higher down payment.
If your community is fortunate enough to not be on one of these blacklists, it is important to ensure that you stay off by maintaining the percentage of owner-occupied units above the 70% threshold. One way to discourage the purchase of condominium units for investment purposes only is to impose a waiting period between the time someone takes title and when the unit can be rented out. If your governing documents do not already contain such language, please discuss the usefulness of such an amendment with your association attorney.
Lastly, if any of you ever wonder what groups push for some of the over-reaching, anti-board legislative proposals we've seen over the last few years, please check out the following site: http://hoatruebeliever.com/ccfj.htm
There are groups like this all over the country who use similar methodolgies and scare tactics to trick the media and state legislatures in to thinking the very real problems in some communities are the norm rather than the exception. It is absolutely essential that the vast majority of owners living in common interest ownership communities become aware of the existence of these groups, familiar with their tactics and willing to fight back with reason and logic.
There are several reasons why a building would be deemed undesirable by a lender and many, but not all of them, relate to whether or not the loans meet the standards of Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Mortgage Corp.) and thus, are eligible to be sold on the secondary market. About 70% of a building must be owner-occupied for it to be considered suitable to be sold to Fannie Mae or Freddie Mac.
As such, buildings with heavy concentrations of investor owners might wind up on a lender blacklist.
Other areas that are being scrutinized closely by lenders in this market are the number of delinquencies in a particular community and any ongoing litigation involving boards, unit owners, developers and vendors.
Please click on the following link to view the properties currently blacklisted by Washington Mutual, BankUnited, Popular Mortgage and Citimortgage. Of course, these lists do not represent the totality of blacklisted property in the State of Florida but are only a representative sampling.
http://www.dailybusinessreview.com/images/news_photos/47126/BankUnited.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/WAMU.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/Popular%20mortgage.pdf
http://www.dailybusinessreview.com/images/news_photos/47126/Citimortgage%20questionnaire.pdf
People wishing to purchase in communities that have been blacklisted by institutional lenders will have to resort to "hard-money" lenders, often paying twice the expected interest rate on shorter terms and with a requirement for a much higher down payment.
If your community is fortunate enough to not be on one of these blacklists, it is important to ensure that you stay off by maintaining the percentage of owner-occupied units above the 70% threshold. One way to discourage the purchase of condominium units for investment purposes only is to impose a waiting period between the time someone takes title and when the unit can be rented out. If your governing documents do not already contain such language, please discuss the usefulness of such an amendment with your association attorney.
Lastly, if any of you ever wonder what groups push for some of the over-reaching, anti-board legislative proposals we've seen over the last few years, please check out the following site: http://hoatruebeliever.com/ccfj.htm
There are groups like this all over the country who use similar methodolgies and scare tactics to trick the media and state legislatures in to thinking the very real problems in some communities are the norm rather than the exception. It is absolutely essential that the vast majority of owners living in common interest ownership communities become aware of the existence of these groups, familiar with their tactics and willing to fight back with reason and logic.
Wednesday, November 21, 2007
Will the Recent FCC Order Banning Exclusivity Clauses Allow You to Cancel Your Cable Contract? By Donna Berger, Esq.
The Federal Communiciations Commission recently issued a Report and Order banning the use of exclusivity clauses for the provision of video services to multiple dwelling units (apartment buildings, condominium, cooperative and homeowners' associations).
This order does not become official until it is published in the Federal Register which should happen in the next two months. This is a reversal of the FCC's position back in 2003 when the agency actually encouraged exclusive contracts between franchise cable providers and those residing in multifamily housing. While the motivation appears to be to foster greater competition and choice, undoubtedly the order will be challenged by providers since the order invalidates not only exclusivity clauses in future contracts but those found in existing contracts as well. The order does not currently extend to private cable operators and satellite service providers. The Order appears to only invalidate the individual exlusivity clauses and not the underlying contracts but some pundits say that bulk cable contracts themselves create an environment of exlusivity and thus, the overall contracst can be invalidated.
From an association perspective, the FCC's indication that it wants to extend the ban to private operators and bulk contracts could spell trouble since an end to bulk contracts could mean an end to significant savings for a community. The bottom line is that it would not be wise to rush out and attempt to cancel your current contract without first discussing all of the ramifications with your association attorney. For some associations tied in to long-term franchise providers who have been unhappy with the product and service for years, this order will provide welcome relief. For others, who are happy with the ability to secure deep discounts as a result of bulk contracts, the extension of the order to ban bulk contracts will not be as well received. CAN works closely with many industry experts.
You can also read more about the FCC order in an article by Terry Sheridan ("For condo viewers, more options, but end to discounts?" in the Daily Business Review." This article is available under the In The News tab on the Community Advocacy Network (CAN) website at http://www.canfl.com/. Please keep an eye out for further discussion on the FCC order and its potential impact by checking the Ask the Experts feature of the CAN website at http://www.canfl.com/.
This order does not become official until it is published in the Federal Register which should happen in the next two months. This is a reversal of the FCC's position back in 2003 when the agency actually encouraged exclusive contracts between franchise cable providers and those residing in multifamily housing. While the motivation appears to be to foster greater competition and choice, undoubtedly the order will be challenged by providers since the order invalidates not only exclusivity clauses in future contracts but those found in existing contracts as well. The order does not currently extend to private cable operators and satellite service providers. The Order appears to only invalidate the individual exlusivity clauses and not the underlying contracts but some pundits say that bulk cable contracts themselves create an environment of exlusivity and thus, the overall contracst can be invalidated.
From an association perspective, the FCC's indication that it wants to extend the ban to private operators and bulk contracts could spell trouble since an end to bulk contracts could mean an end to significant savings for a community. The bottom line is that it would not be wise to rush out and attempt to cancel your current contract without first discussing all of the ramifications with your association attorney. For some associations tied in to long-term franchise providers who have been unhappy with the product and service for years, this order will provide welcome relief. For others, who are happy with the ability to secure deep discounts as a result of bulk contracts, the extension of the order to ban bulk contracts will not be as well received. CAN works closely with many industry experts.
You can also read more about the FCC order in an article by Terry Sheridan ("For condo viewers, more options, but end to discounts?" in the Daily Business Review." This article is available under the In The News tab on the Community Advocacy Network (CAN) website at http://www.canfl.com/. Please keep an eye out for further discussion on the FCC order and its potential impact by checking the Ask the Experts feature of the CAN website at http://www.canfl.com/.
Friday, July 27, 2007
Questions and Answers
The Condolaw Blog now has a new look; hopefully one which is easier to read!! Over the last year we've covered a range of topics including eligibility to serve on a board, the Office of the Condominium Ombudsman, legislation that impacts community associations and lien collection issues among other timely issues.
I'd like to use this post to invite each of you to ask questions on any topics that might not have been covered by past posts. Remember, I cannot answer questions that require the interpretation of your individual documents. This blog is designed to be an informal discussion of topics of interest to those who live in common interest ownership communities as well as those serving on a community association board of directors. This blog is not meant to create an attorney client relationship nor does the discussion herein constitute legal advice. What it does represent is another avenue of information for the significant percentage of Florida's population that resides in a common interest ownership community.
I hope you're all enjoying your summer whether you're spending it here down in Florida or have headed up to (hopefully) cooler climates. Please take advantage of all the information that is out there to assist you with running your communities in the most efficient and cost-effective manner possible.
I'd like to use this post to invite each of you to ask questions on any topics that might not have been covered by past posts. Remember, I cannot answer questions that require the interpretation of your individual documents. This blog is designed to be an informal discussion of topics of interest to those who live in common interest ownership communities as well as those serving on a community association board of directors. This blog is not meant to create an attorney client relationship nor does the discussion herein constitute legal advice. What it does represent is another avenue of information for the significant percentage of Florida's population that resides in a common interest ownership community.
I hope you're all enjoying your summer whether you're spending it here down in Florida or have headed up to (hopefully) cooler climates. Please take advantage of all the information that is out there to assist you with running your communities in the most efficient and cost-effective manner possible.
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