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Association Developments
First Quarter
Volume XV
1999
a service provided by Clayton & McCulloh
INTRO TO COVENANT ENFORCEMENT 101 The single topic which generates the most questions,
concerns, and potentially even litigation for
associations is perhaps Rule and Covenant
Enforcement. Therefore, together with your collection
policy, there may be no other area where consistent, timely
and uniform enforcement is more critical to an association.
Proper covenant enforcement not only should help to
preserve and protect the association's property values, but also should
help to maintain the association's (i.e., the Board's)
credibility with the membership. We find that it is very
easy for associations and their board of directors to loose
credibility and very difficult to recapture it. In fact, some
of the most frequent criticisms we hear from owners
regarding their board of directors are: 1. The Board is too wishy-washy. 2. There is no uniform enforcement. 3. There is no timely enforcement. 4. There are far too many exceptions to enforcement. 5. The board of directors plays favorites. see Intro 101, pg 2 INTRODUCING... OUR VOLUSIA COUNTY BRANCH OFFICE You asked for it! You've got it! On January 22,
1999, Clayton & McCulloh opened a branch office
in Daytona Beach. Our
new branch office's address is
406 North Olive Avenue,
Daytona Beach, Florida
32118. Our phone number is
(904) 947-9996 and the fax
number is (904) 258-1930.
This office is located on the
beach side of Daytona Beach
and is approximately three
blocks from the Adam's Mark Resort (where we normally
hold our Community Association Law Seminars). This is our second branch office with the other one being
in Brevard County (Indian Harbour Beach). The formal
announcement was made at our 1999 Community
Association Law Seminar in Daytona Beach on January
30, 1999, to a capacity filled room at the Adam's Mark
Resort. For directions or for an appointment, at our new branch
office, please call us at the above stated phone number.
Volume XV Page Two Clayton & McCulloh
We are pleased to announce that William "Bill" Tompkins, Jr., has joined the firm. Bill has been practicing law for more than eleven years. He has handled commercial and residential closings and represented homeowner associations in their collection of delinquent assessments and covenant enforcement needs. Bill has also been an adjunct law professor at Southern College. In addition, he has spoken at many seminars on various underwriting issues while he was with Attorneys Title Insurance Fund, Inc. He has written numerous law articles that have been published in such prestigious publications as The Florida Bar Journal, The Real Property, Action Line, and The Fund Concept.
DON'T FORGET . . .
If you elected new officers in December and January,
please forward a list of your new directors complete
with home addresses, telephone/fax numbers, email
addresses, and work numbers. If you have not already sent
this in, please mail, fax, or call them into any of our
offices. It is very important that this information be kept
current for the Association's protection. If a former
director calls into the office and we have not been advised
of the change in their status to owner (rather than
director), it may cause some difficulties for the
Association.
By providing us with information on your new board, each
director will receive our client newsletter, invitations to
free seminars, and legal updates on community association
law and the industry.
And finally, by now you have received your Annual Corporate Report Form from the Secretary of State. The deadline to file this report with the Secretary of State is May 1, 1999. Failure to timely file this report could result in serious consequences to the Association. You may be under the mistaken impression that if you don't file the report, the association will cease to exist. If you would like more information on the consequences of not filing your corporate report on time, please call our office.
INTRO 101 (from pg 1)
- The board of directors has not adequately apprised the membership of what is expected.
7. The association has no backbone.
8. The association refuses and fails to take into account special circumstances (i.e., it has no heart).
9. The Association is too picky.
10. The Association is too hard.
11. The Board is acting for personal gain or benefit.
12. The Board is acting as a Gestapo.
As you can see, regardless of the approach a Board takes
(i.e., enforce or not enforce), it will probably be criticized.
Nevertheless, what is most difficult for members to deal
with is the situation where they neither understand nor
appreciate what is expected of them with respect to the
association's covenants and rules. Therefore, associations
should have very distinct and clear policies and procedures
with regard to covenant enforcement.
Often associations use a two-letter approach before the matter is referred to an attorney to compel an owner's(s') compliance (i.e., the association sends two demand letters requesting compliance before involving an attorney). There is nothing necessarily wrong with more or fewer letters from the association prior to the matter being turned over to an attorney to compel compliance. Nevertheless, it is our experience that when associations send out three or more letters demanding compliance, the unit owners cease to take the association seriously, as the association is viewed
as having no backbone. Therefore, generally, we recommend only two request or demand letters from the association before the matter is turned over to an
attorney to compel a violating owner's compliance with the Governing Documents.
see Intro 101, pg 3
Volume XV
Page Three Clayton & McCullohINTRO 101 (from pg 2)
Additionally, the association should strive to make the letters, as well as the time-frames for compliance, uniform. More specifically, if the association wants to request compliance within 30 days of its first letter, then it should give all owners the same 30 day time period. Similarly, if the association wanted to allow only 15 days in the second letter, then it should only allow 15 days for all owners.
The first letter should delineate to the violating owner that the owner will only receive one more notification (i.e., letter) from the association prior to the matter being turned over to the association's attorney to compel compliance. In fact, we recommend that the association's enforcement procedure be set forth in both of the letters (i.e., delineate to the violating owner how many notices he or she will receive and when the matter will be turned over to its attorney).
Additionally, we suggest the association set forth in both
letters that if the matter is turned over to the attorney, then
the law firm shall seek to collect from the violating
owner(s) all the attorney fees and costs associated with
compelling the owner's compliance with the governing
documents. Nevertheless, it needs to be understood that
the association may or may not ultimately collect its
attorney fees and costs. In fact, such costs and fees
generally would only be awardable at the culmination of
a successful trial.
Once the matter has been turned over to the association's
counsel to compel the violating owner to comply with the
Governing Documents, then generally, it is a good idea for
all of the board members, as well as the manager, to direct
all conversations, correspondence, inquiries and
discussions to its law firm. This should help to reduce the
amount of miscommunication between the various parties.
Similarly, the association's attorney needs to be involved
in every step of the process. In fact, if the association is
discussing this matter or committing to items without its
attorney's involvement, then, quite frankly, the association
may be waiving certain rights and/or precluding its ability
to obtain a better resolution, including potentially
recovering its costs and attorneys fees.
Speak with your counsel regarding when he or she would
recommend that matters be turned over to their office.
Board members do not get paid for their services. As
such, these volunteers should not be subjected to the day
after day criticism and abuse by their neighbors who are
violating the documents. One of the best ways to avoid
this result is by the board members being able to tell the
violating owner that upon advice of counsel:
1. The matter has been referred to the association's
attorney;
2. All communications, correspondence, etc., must be directed to the law firm; and
3. The board member is no longer authorized to deal
with this matter.
In fact, the board members may want to point out
that:
1. He or she wishes that the violating owner had
dealt with this matter previously; and
2. If the violator had come to the board earlier (i.e.,
before the matter had be turned over to counsel),
a quicker, cheaper and better resolution most
likely could have been obtained.
(Note, the above statements should work equally well for your manager.) Understand the association is paying its law firm in part to remove, to the degree
see Intro 101, pg 4
Volume XV Page Four Clayton & McCulloh
INTRO 101 (from pg 3)
possible, the potential abuse and problems associated with
compelling an owner('s) compliance. Therefore, once
transferred to an attorney, both the manager and the Board
should endeavor not to discuss the matter with the
violating owner which hopefully will curtail the abusive
owner.
Generally, once the matter is referred to the association's
counsel, the law firm will more than likely write its own
covenant enforcement letter demanding compliance by the
violating owner. If the violating owner thereafter does not
come into compliance within the designated time period
set forth in the attorney's demand letter, then ostensibly
the attorney will point out various options to the
association, including proceeding with a covenant
enforcement action in the circuit courts, or arbitration with
the Bureau of Condominiums. Provided the association
wants to proceed with a suit or arbitration, the board
should seriously consider passing a formal motion at a
board meeting wherein it directs its counsel to proceed
with litigation in the courts and/or arbitration with the
Bureau of Condominiums. By utilizing this procedure,
the association ostensibly will have demonstrated in its
official records that no one board member or officer
determined that this matter should go to litigation, etc., but
rather the entire board at a duly noticed and called board
meeting voted to proceed. Your counsel can help you with
respect to setting up the requisite procedures and motions
regarding such matters. In fact, we generally draft the
motion for the board of directors which simplifies this
matter for the association.
The problem with an association failing to enforce its
documents, including its rules and regulations, is that its
failure to compel compliance today may preclude its
ability to compel compliance in the future. Unfortunately,
there can be significant costs associated with covenant
enforcements. As such, it is imperative that the
Association's credibility be fostered and that the violating
owner be made perfectly aware of the following:
1. The violation.
2. The basis of the violation.
- The fact that the violation contravenes the Governing Documents as well as the Florida Statutes (i.e., either FS 617 or 718).
- The association has the ability under both the Florida Statutes as well as the Governing Documents to compel compliance.
- Under both the Governing Documents and the Florida Statutes, the association may be able to obtain its costs and attorneys' fees (at least if the association is victorious at trial or at arbitration), etc.
As the costs of the covenant enforcement procedure can become expensive, every effort should be made to obtain the earliest compliance by the violating owner. Additionally, the Association and its counsel should generally seek to recoup its reasonable attorney fees and costs (at least if the association is victorious at trial or arbitration). However, an association which obtains voluntary compliance (even after the matter has been transferred to its counsel) should seriously consider whether it should cease pursuing the matter, (i.e., cease pursuing the matter if the only remaining issue is the Association's claim to recover its costs and attorneys' fees). Oftentimes we encounter associations who, even after the owner has complied, insist upon pursuing the matter to recover their costs and
see Intro 101, pg 5
Volume XV Page Five Clayton & McCulloh
INTRO 101 (from pg 4)
attorneys' fees. Ultimately, as set forth above, generally
such funds are only awarded at trial or at arbitration.
Therefore, there is risk to associations which pursue these
matters in an attempt only to recover attorneys' fees.
Moreover, the case may be determined by a court to be
moot once the violation has been corrected (i.e., the
association could be precluded from recovering any fees).
Ultimately, an association's approach to covenant
enforcement is critical. The association should insure that
it timely, consistently and uniformly enforces its
documents, including the covenants and restrictions.
Understand the failure to timely, uniformly and
consistently enforce the documents, subjects the
association to defenses which could preclude enforcement
both with respect to the individual case at hand as well as
future cases. As such, an association which postpones or
allows deviations from the requirements of its documents,
is putting itself and its future enforcement actions in
jeopardy. Many associations fail to realize that significant
defenses can arise by virtue of their failure to enforce their
documents timely, uniformly and consistently. Such
defenses include, but are not necessarily limited to the
following:
- Laches - which in layman terms means simply by virtue of the passage of time, the association's rights may become stale and unenforceable (i.e., if the association fails to timely enforce a provision, it may lose its right to enforce it);
- Selective Enforcement - which in layman terms means the association should be precluded from enforcing against Mr. Jones that which it does not enforce against Mr. Smith;
- Waiver - which in layman terms means a relinquishment of a known right (i.e., the association must have a right and knowingly and voluntarily relinquish the right); and
- Estoppel - which in layman terms means in fairness, in equity, the association should be precluded from enforcing a provision by virtue of some previous action or potentially some inaction.
As you can see, it is easy for the above defenses to set in. Therefore, associations need to guard their rights closely and implement the requisite covenant enforcement procedures. As set forth above, we even recommend our associations adopt a specific covenant enforcement procedure via a motion at a board meeting. Moreover, such covenant enforcement procedure needs to be uniformly, timely and consistently enforced regardless of the violation and regardless of the violator.
The attorneys in our firm hate to ever lose a case. As
such, we desire the best cases possible. We endeavor to
curtail the number of defenses which we must overcome.
Ultimately, the shorter the period of time which exists
between learning of the violation and proceeding with
attempting to compel compliance with the Governing
Documents, the better.
While you can expect to encounter one or more of the above defenses in almost every covenant enforcement case, that does not mean that the association loses. However, it does present a risk and obstacle for the association to be avoided, if possible. Ultimately, if
see Intro 101, pg 6
Volume XV
Page Six Clayton & McCullohyou want to STOP violations, proceed now, do not wait. In general, the defenses will only get stronger. However, if the above defenses exist, discuss them specifically with your counsel and have him speak to you about rehabilitating your governing documents.
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