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Archive for the ‘HOA’ Category

California Homeowners’ Associations Must Allow Politicking: SB 407 is Now Law

Posted on: November 22nd, 2017

By: Jeffrey R. Cluett

On September 11, 2017, California Governor Edmund G. (“Jerry”) Brown, Jr. signed into law Senate Bill No. 407, which passed the California Senate and the California Assembly unanimously. SB 407 has been codified as California Civil Code Section 4515.

Prior Protections

California Civil Code Section 5105(a)(2) requires an association to ensure access to common area meeting space, during a campaign, at no cost, to candidates and members advocating a point of view, including views not endorsed by the board.

Similarly, Section 5105(a)(1) requires that if any candidate or member is provided access to association media, newsletters, or websites during a campaign, for purposes related to an election, the association shall provide equal access to candidates and members advocating a point of view, including those that are not endorsed by the board.

Section 4515’s Added Protections

Section 4515 adds to Section 5105’s protections. It bars associations’ governing documents from prohibiting members or residents from assembling or meeting in common areas or a member’s separate interest, during reasonable hours, for purposes related to common interest development living, association elections, legislation, election to public office, or the initiative, referendum, or recall processes, or for social and educational purposes.  This includes inviting public officials and candidates for office to meet with members, residents, and their invitees, canvassing and petitioning members, and distributing, without prior permission, information about common interest living, association elections, legislation, election to public office, or the initiative, referendum, and recall processes.

It also prohibits a member or resident from being required to pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy(ies) to use the common area for these activities.

It also authorizes one prevented by an association or its agent from engaging in these activities to bring a civil or small claims action to enjoin the enforcement of a governing document that violates Section 4015. It also authorizes the court to assess a civil penalty of not more than $500.

This law gives community interest associations attributes of public spaces for members, residents, and invitees. Indeed, the Senate Judiciary Committee analogized common areas to public spaces: “Just as with municipalities, CIDs are marked by common areas, be they streets, sidewalks, park, open courtyards, clubhouses, or common rooms.”  According to its author, “SB 407 would protect the political free speech rights of the 25% of Californians that live in common interest developments by prohibiting HOAs from creating community rules that disallow owners or residents from contacting others for the purpose of informing them about any issue that is the subject of public or association legislation of rule-making.”

Unintended Consequences?

While Section 4515 broadens members’ rights to expression, it may open homeowner associations to disruptive or offensive activities. Under Section 4515, a member or resident could hold demonstrations or marches.  Section 4515 appears to say that common interest associations could not prevent them.  While residents may applaud the increased speech and assembly protections, we foresee disputes arising from activity that association members find troubling or even offensive, but which Section 4515 appears to protect.

Beware of Potential Liability

Common interest development associations should ensure that their governing documents comply with Section 4515. If they do not, they should not enforce those provisions that do not comply with Section 4515.

If you have any questions or would like more information, please contact Jeff Cluett at [email protected].

HOA Wins Beach Tax Brawl

Posted on: October 20th, 2017

By: Michael Kouskoutis

In Beach Club Towers Homeowners Ass’n v. Jones, 2017 Fla. App. LEXIS 14235, Florida’s First District Court of Appeal held in favor of an HOA in an attempt to settle a series of property tax disputes over government-owned land.

Before the DCA’s ruling, the trial court held that condominium unit owners were required to pay property taxes on land underneath the condo, despite the fact that the condo merely leased the underlying land from the County (and each unit owner subleased from the condo’s master lease). In reaching its conclusion, the trial court found that unit owners were the “equitable owners” of the underlying land for ad valorem tax purposes, since the condo held “virtually all the benefits and burdens of ownership of the leased property.”

Upon close examination of the lease itself, the 1st DCA reversed, holding instead that unit owners were not responsible for these property taxes. Key to the court’s decision was that the lease was not perpetually renewable–each unit owner’s sublease contained an option to renew for an additional term, with “conditions to be renegotiated at such time.” Therefore, since the renewal of each sublease was negotiable rather than automatic, none of the “primary hallmarks of equitable ownership” were present. The court also noted that whether land is improved has no bearing on the issue of equitable ownership. The County plans to appeal the decision to the Florida Supreme Court.

Condominium associations situated on government-owned land should keep in mind that the renewal terms contained in their leases could have profound impacts on the tax responsibilities of its members.

If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

Florida Legislature Rewrites Laws for Condo Community Associations

Posted on: June 22nd, 2017

By: Melissa A. Santalone

Florida House Bill 1237, a bill which proposed significant changes to several laws governing condominium community associations, passed both houses of the Florida Legislature in the 2017 legislative session and is expected to go into effect as of July 1, 2017. The bill, written in response to public outcry over corruption and criminal activity in condo communities in South Florida, revised aspects of the Florida Statutes  to prohibit certain conflicts of interest for condo boards and board members; apply criminal penalties for certain actions by board members; and impose new requirements for financial statements, recordkeeping, and elections, among other things. Here are just some of the key changes pertaining to conflicts of interest and newly criminalized activities:

Conflicts of Interest

  • An association is prohibited from hiring an attorney who also represents the management company for the association.
  • A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title in lieu of foreclosure.
  • An association, unless it is a timeshare condo association, may not employ or contract with any service provider that is owned or operated by a board member or officer, or any person who has a financial relationship with a board member or officer, or certain relatives of board members or officers, unless the board member or officer owns less than 1 percent of the equity shares.
  • If, after transfer of control to the association, 50% or more of the units in the community are owned by a party contracting to provide maintenance or management services to an association or by a board member or officer of such a party, the contract may be cancelled by majority vote of the unit owners other than the contracting party or the officer or board member of the contracting party.
  • Certain disclosures must be made by any officer or director proposing to engage in activity that is a conflict of interest. If the board votes against taking the action, the officer or director must notify the board in writing of his or her intention not to take the action or to withdraw from office. If the board finds an officer or director violated this provision, the officer or director shall be deemed removed from office.
  • A rebuttable presumption of a conflict of interest exists if, without prior notice, (1) a director or officer of an association or certain of their relatives enters into a contract for goods or services with the association or (2) a director or officer or certain of their relatives holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

Newly Criminalized Activity

  • Officers, directors, and managers are prohibited from soliciting, offering to accept, or accepting any kickback for his or her own benefit or that of his or her immediate family, and violation of this provision is considered a violation of the criminal law. A violation of this provision may also subject an officer, director, or manager to civil penalties.
  • Forgery of a ballot envelope of voting certificate used in an election is a felony of the third degree and punishable by up to 5 years in prison.
  • The theft or embezzlement of funds of a condo association is considered a theft and punishable pursuant to Fla. Stat. § 812.014.
  • The destruction of or refusal to allow inspection or copying of an official record of a condo association in furtherance of a crime is punishable as tampering with physical evidence or as obstruction of justice.
  • An officer of director charged by information or indictment with a crime referenced above must be removed from office until the end of his or her period of suspension or the end of his or her term, whichever occurs first.
  • If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or director of any association and may not have access to the official records of any association, except pursuant to court order.
  • If the charges against the officer or director is resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term in office, if any.

These changes to the laws governing condo community associations will serve to complicate board and board member compliance with the new provisions. For guidance on these changes to condo association law or any aspect of Florida law governing community associations, please contact the attorneys in FMG’s Tampa office.