Condo & HOA Law, Naples Daily News

Naples Daily News Legal Column | April 26, 2020 | COVID-19 Questions Continue

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Q: One of our Board members is against borrowing any money and insists that we should be able to use reserves to offset any condominium assessment shortfalls or extra expenses stemming from Covid-19. Is there authority for this?

A.P., Naples

A:   I will initially note that this answer can be very different for a condominium association compared to a homeowners’ association. In a condominium association, the general rule is that reserves can only be used for their intended purposes absent a vote by the unit owners. If there is no vote by the owners, reserves are typically not available to fund operating expenses. Many clients are under the impression that the statutory emergency powers permit the use of reserves for operating expenses during this time, but that authority is not expressly included in the statute. In other words, unless your governing documents provide a special emergency power, the statute would not allow the condominium association to use reserves for operating expenses unless there is a vote of the unit owners to allow such use. The threshold only requires a majority of those voting at a meeting to approve the alternate use for operating expenses, and so you should consult with legal counsel to review your documents and a vote is likely required.

Q: As a result of Covid-19, we have transitioned to conducting Board meetings via online platforms such as zoom and have really enjoyed conducting meetings this way. Can we do this indefinitely?

D.B., Marco Island

A:   This has been a common question and many clients seem to particularly enjoy the mute function as an organizer of the meeting. During this time when large group gatherings are untenable, the virtual meeting has become a great solution and provides the ability to make presentations, disseminate information broadly, real time communication, and is relatively easy to navigate.

Long term, however, I do not believe this will be an exclusive mechanism to hold Board meetings because it ultimately requires owners to obtain technological capabilities that are not required by the statute. For example, Florida law does not currently allow the Association to employ electronic voting as a sole means of voting unless there is 100% consent to do so. Florida law also only permits the Association to provide electronic notice to those owners who consent to receive electronic notice. In other words, if you want the paper ballot, or if you want to receive notice via regular mail, you are entitled to the paper ballot and paper notice.

Likewise, the Florida Condominium Act does currently permit the Board to conduct Board meetings via conference call or real-time videoconferencing, but also requires a physical location where owners can physically attend and engage with the Board. Specifically, Florida Statutes section 718.112 provides that “a board or committee member’s participation in a meeting via telephone, real-time videoconferencing, or similar real-time electronic or video communication counts toward a quorum, and such member may vote as if physically present. A speaker must be used so that the conversation of such members may be heard by the board or committee members attending in person as well as by any unit owners present at a meeting.”

Thus, unless there is a shift in legislation to require owners to engage in electronic participation and notice, any virtual meeting after this emergency has concluded would likely require a physical location with a speaker phone or computer set up so that owners could physically attend and participate without having to acquire the technology to do so – even if all of the Board members are on the phone or in the virtual meeting. For now, however, this is the best solution to a new problem.

Q: We recently engaged a contractor to perform some major renovations throughout our homeowners’ association. The contractor essentially admitted that the problems were his fault but has only offered to refund his payments. The cost to fix the problems, however, is much more than what we paid the contractor. What are our options?

T.P., Bonita Springs

A:   I recognize that this is self-serving, but we highly recommend that community associations have contracts reviewed by legal counsel prior to executing or, at a minimum, contracts of significant value. We are seeing more and more contracts being proposed that include provisions limiting the contractor’s liability. For example, the contract may provide that the contractor must carry $1,000,000 in insurance, but also provide that the liability for any claim is capped at the fee paid to the contractor. If you only pay the contractor $20,000, then the insurance represents less value and protection. And here, if your contract does include a provision limiting the contractor’s liability, then you could be left paying twice to fix the problems.

The above paragraph assumes that your contract includes a limitation cap, and it also assumes that the limitation cap is enforceable. These provisions have some technical requirements and thus I would recommend you have the contract reviewed by counsel to determine if this provision exists, and whether it is enforceable.

If you do not have any contractual restriction on recovery from the contractor, then the contract must still be reviewed to determine the next step. Some contracts require mediation, some contracts require an opportunity to cure, some contracts require you to timely notify the contractor of any deficiencies, and some contracts require progress payments and retainages which alter the analysis. After you have determined what must be done next under the contract, then we recommend you work with your attorney to determine an appropriate strategy. As you would expect, a dispute with a national contractor with lots of liquidity can be very different than a dispute with a sole proprietor.

One of the biggest problems we encounter is the lack of a contract altogether. We frequently see very large contracts awarded and the contract ends up being a 1-page estimate with a signature line at the bottom. If this is the situation, you may technically have a contract, but you may be largely left with common law and statutory contract remedies that may not be good for you.

The point is that a lot of these problems can be avoid before you sign the contract or at least the Board should make a calculated business decision before signing a problematic contract or a contract with very little protection.

Visit our Condo/HOA Blog for more of our Q&A articles.

 


Steven J. Adamczyk, Esq., is a shareholder of the Law firm Goede, Adamczyk, DeBoest & Cross, PLLC.  Visit our website www.gadclaw.com, or to ask questions about your issues for future columns, kindly send your inquiry to: info@gadclaw.com.  The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, PLLC or any of our attorneys.  Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.