Q: Our condominium Articles of Incorporation provide that the Board shall consist of 3 Directors, but our Bylaws provide that the Board shall consist of an odd number of Directors between 3 and 7. Which one is correct?
A: In most situations, the governing documents will include a statement whether one document controls over the other document when two documents contain conflicting provisions. Typically, the Declaration of Condominium controls over a contrary provision in the Articles of Incorporation or the Bylaws, and the Articles of Incorporation control over a contrary provision in the Bylaws.
To properly answer the question, I would obviously need to review the specific language in each of the above-referenced documents. Nevertheless, the most likely answer without reading the documents is that the Articles would prevail, and the Board would consist of 3 Directors.
Many Associations do not frequently check the Articles of Incorporation and thus it is very likely your Board has been operating with 5 or 7 Directors for some time. If this is the case, you should discuss this discrepancy with your attorney to find the best route forward. I should also note that the provisions governing the number of Directors varies greatly. In other words, there is no stock language for this issue and thus the analysis is very dependent on the specific language in your documents and so the first step is to obtain an opinion based on the language in your actual documents to determine if there is a conflict or whether the two provisions could be read together. For example, it is possible your Articles provide that the Board shall “initially” consist of 3 Directors, in which case the Bylaws may apply because the two provisions may be read together.
Q: An owner in our community insists that he should not have to pay assessments for the amenities that were closed for coronavirus. He argues that he should receive a credit on assessments because he was not able to use them. I assume this is not correct, but what is the explanation?
C.I., Marco Island
A: This has become a frequent argument, but it is not a successful argument.
When the association adopts its budget prior to the fiscal year, that budget represents anticipated income and expenses. The fact that the pool, for example, is closed, does not mean that the association is not incurring any expenses to maintain the pool. The association must continue to carry insurance on the pool, maintain the pool, and secure the pool whether it is open 24 hours a day or not at all. Yes, the Association may be saving on some cleaning and maintenance costs due to normal wear and tear, but the actual expenses are still not completely known. If the Association elects to re-open the pool, it may incur unbudgeted cleaning expenses or it may incur additional maintenance costs to the tennis courts to avoid owners touching the court brooms. The Association may incur unbudgeted supervision expenses during reopening depending on which county you live in.
The point is that the budget represents anticipated expenses and availability is not a condition of payment. Most communities close the clubhouse at night or keep the pool closed until early in the morning because the governing documents authorize the Board to adopt reasonable rules concerning use of the common areas. Along these lines, should owners be asking for a refund for not being able to swim laps at midnight? So, if you assume the Board has the legal authority to close an amenity due to COVID-19 (and we argue that the Board has this authority as of the writing of this article) then the obligation to pay assessments is not impacted.
If the Board is running under budget and does not foresee additional expenses, the Board could provide assessment relief by re-opening the budget and reducing the budget for the remainder of the 2020 fiscal year. If you pay assessments quarterly, this means the decreases would be reflected in lower assessments payments on July 1 and October 1. This is, however, not required.
Q: This same owner only paid about ¾ of the assessments due April 1. What is the process to collect the balance under Florida law?
C.I., Marco Island
A: If the owner does not pay the assessment in full, then the owner becomes delinquent. You would first need to review your governing documents to determine any grace period for payment, and then the delinquent amount begins accruing interest and you may charge a late fee provided it is authorized in the governing documents.
The Board would then determine when the Association should begin the collections process. Your question above indicates that the balance may be very small and thus the Board may decide to move forward when or if the balance exceeds a certain amount. Nevertheless, when the Board makes the decision to begin the collections process, the process itself is regulated by the statutes.
In a condominium, the first step is typically to send a letter to the owner notifying the owner of the delinquent amount and providing a 30-day period for the owner to pay the association before a lien is recorded against the unit. If the owner fails to pay the delinquent assessment, interest, late fees, attorneys’ fees and costs, then the association could record the lien and then send the owner a subsequent demand letter for payment and providing a 30-day period before the association files a lien foreclosure action. In a homeowners association, note that these 30-day periods are replaced with 45-day periods.
At this point, it is critical to have a working dialogue with your attorney to determine the best course of action. A successful collections program recognizes that each situation is different, and the Board may make a different decision when, for example, the unit is vacant compared to when the unit is rented. It is important to share this information with your attorney to make a sound decision on each account.
Now, the above timeline assumes a normal legal environment and we are not in a normal legal environment. As I write this article, there remains a statewide moratorium on mortgage foreclosures and this moratorium may impact your lien foreclosure and it will certainly impact how the mortgage lenders pursue mortgage defaults. There is also proposed federal legislation suspending the collection of some consumer debts which could drastically impact the ability to collect assessments because assessments are considered consumer debt. As a result, if are considering moving forward with collection activity, you should check with your attorney on the status of any state or federal regulations impacting your rights under the governing documents.
Steven J. Adamczyk, Esq., is a shareholder of the Law firm Goede, DeBoest & Cross, PLLC. Visit www.gadclaw.com, or to ask questions about your issues for future columns, kindly send your inquiry to: firstname.lastname@example.org. 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, 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.