ASSOCIATION BOARDS: CONTRACT CHECKLIST

Before entering into a contract with a vendor, boards should make sure they cover each of the following points:

1. License. Verify that the contractor is licensed.

2. Insurance. Make sure the contractor carries workers' compensation insurance, provides proof of insurance and names the association as additional insured. Made sure the contractor's insurance does not contain a multi-family or condo exclusion. 3. Governing Documents. Make sure the contract does not violate any limitations in the association's governing documents.4. Legal Review. Have legal counsel review all contracts with attention to particular contract clauses. Following are some issues and clauses that need to be reviewed in all agreements:

Parties. The opening paragraph of a contract typically names the parties to the agreement. The contract should not name the directors as parties. Instead, it should be the corporate name of the association. If directors are listed as parties to the agreement, they could be named personally in any litigation that might result because of any alleged breach of the contract. The contracting party is the corporation which the directors sign on behalf of the corporation.

Scope of Work. The scope of work must be clearly defined. An ambiguous or incomplete description of the project gives rise to disagreements and makes it difficult to hold the vendor accountable for his work.

Payment Schedule. Define the payment schedule. Generally, payments should be phased so that monies are paid to the contractor as work is completed. As a rule, full payment should not be paid up front, since it exposes the association to significant risk of loss if the contractor does not perform. Normally, a percentage is paid up front so the contractor can purchase materials and begin work. A percentage, usually 10%, is retained by the association at the conclusion of the work until everything is signed-off. 

Insurance. Define the types of insurance and minimum limits the vendor must carry and whether the association is named as additionally insured on the policy.Indemnity Provision. Vendor agrees to protect the association if it gets sued because of some act or omission by the vendor.Time for Performance. If performance dates and times are important, put them in the contract.Permits and Licenses. Vendors must be licensed and pull permits whenever appropriate and provide the association with copies of both.Warranties. If the vendor promises to stand behind his/her work, be sure to put it in the contract. You should also have the manufacturer's warranty against defects in the products (not necessary for service providers).Mechanics Liens. Mechanics lien provisions should protect the association in the event the vendor fails to pay his subcontractors or material suppliers.Termination Clause. If work is not performed satisfactorily, there should be a provision for terminating the agreement.Evergreen Clause. The contract automatically renews if notice is not given to the vendor of the association's intention to not renew the agreement.Escalator Clause. The association's payments to the vendor automatically increase each year. The increases may be predetermined or may be linked to the CPI.Alternative Dispute Resolution. An ADR provision is often included in contracts so as to keep litigation costs to a minimum and to speed resolution of any disputes.Attorneys' Fees. Without an attorneys' fee provision, typically each side bears their own fees and costs.

RECOMMENDATION: Boards should have the association's legal counsel review all contracts before they are signed by the board. Contact us for assistance in preparing and enforcing contracts.

Summary Robert’s Rules for Association Board Meetings:

The application of Robert’s Rules can make a large meeting run briskly and smoothly.
However, in some circumstances, the formality of Robert’s Rules can actually hinder business. One such situation relevant to community associations is the application of Robert’s Rules at board meetings.
Most board members and managers are not aware that Robert’s Rules recognizes the problem of applying formal parliamentary rules to board meetings. Robert’s Rules specifically provides that in a board meeting where there are not more than about a dozen board members present, some of the formality that is necessary in a large assembly can be relaxed.

The rules governing such meetings are different in the following respects:
1. Members are not required to obtain the floor before making motions or speaking, which they can do while seated.
2. The president can make motions and vote on all matters.
3. The president can speak on any matter before the board.
4. No motion needs to be seconded.
5. There can be informal discussion of a subject without a motion being made.
6. If a proposal is perfectly clear, a vote can be taken without any motion having been introduced.
7. After a general discussion has been held without a motion, action can be agreed upon by unanimous consent without taking a vote at all.

A board always has the option to follow the regular, more cumbersome parliamentary procedures if the board works better in a more formal setting. However, most boards seem to function more efficiently with a simplified process. Of course, on important or very complex matters, a clearly stated motion can be helpful to ensure that everyone understands what is being voted upon.
Other matters, however, can be handled without making a formal motion. For example, where the board has thoroughly discussed three bids for landscaping without a motion, and where it was obvious that one bid is much better than the others, the president can bring the matter to a simple conclusion by stating:
"If there is no further discussion and no objection, let the minutes reflect that the board voted unanimously to approve the proposal from ABC Landscaping Company and the president is authorized to execute the proposed contract after it is reviewed by the association’s attorney."
The key to the above scenario is that the matter is unanimous. If it were not unanimous, the president could state as follows:
"If there is no further discussion, I move that we accept the proposal of ABC Landscaping Company and that the president is authorized to execute the proposed contract after it is reviewed by the association’s attorney. All in favor say "aye". All opposed? (The minutes then reflect the actual vote.)"
If desired, the board can revert to any of the more detailed requirements of Robert’s Rules by a simple majority vote of the board.
Many association boards have operated with short form procedures by custom without realizing that simplified procedures are specifically provided in Robert’s Rules of Order. However, many boards assume that Robert’s Rules more complex and detailed procedures are required. Section 48 of Robert’s Rules should put to rest any objection anyone may have to the use of simplified procedures in association board meetings.

QUICK TIPS : FLORIDA LAW 2011 LEGISLATIVE SUMMARY

Assessments – Master.

In a stated effort to clarify the law, a condominium association acquiring a unit by an assessment lien foreclosure or deed in lieu of foreclosure is not responsible to another statutorily defined condominium or homeowners association for assessments, interest, late charges, attorney’s fees, or costs, which were delinquent before acquiring title. Section 718.116 (1)(b)2.

Assessments – Tenancy. 

If a unit’s monetary obligations to its condominium association are delinquent, then the association may require the unit’s tenant to pay the association all obligations the tenant would owe the landlord until all moneys the owner owes the association are paid in full. The association must provide the tenant a statutory form of notice by hand or U.S. mail. A tenant’s immunity from the landlord’s claim of non-payment is dependent upon the tenant’s timely payment of moneys to the association. The tenant’s obligation does not cease until the association provides a release or the tenancy terminates. Section 718.116 (11)

Note: Associations will desire to keep up- to-date lists of tenancies and cross check the lists against unit delinquency lists.

Enforcement – General.

 If a unit owner, tenant, or invitee violates a condominium’s restrictions, then the condominium association may suspend for a reasonable time a unit’s rights to use common elements, common facilities, and other association property. Fines and suspensions still must be imposed by a committee, and a fine may not exceed $ 100 per violation, or $ 1000.00 in the aggregate, and may not be the subject of a lien. Section 718.303(3)

Ertl and Kistemaker Booth Sponsor At PM-EXPO

Ertl & Kistemaker Business Law Group will attend and we will have a booth set up. PM-EXPO is the premier trade show for all types of property managers and owners. Whether your business is apartment complexes, condo associations & HOA’s, office buildings, single family homes or management of time-share properties. Click on the logo for more details.

Florida Association Law: Warranty Expiration v. Statute of Limitations on Construction Defect Claims

A warranty period in the context of condominium and homeowner association construction warranties is the finite period of time that the quality of a particular building component is guaranteed by a developer, general contractor, etc.  A statute of limitations in the context of a warranty claim is the period of time during which a claim on the warranty must be filed in court to preserve the warranty claim.  These time periods are often confused.   Hopefully, this post will help clarify the matter.

Florida Condominium Warranties

 a.  Warranty Expiration

For new condominiums, per Florida Statute 718.203, statutory warranties extend from the developer, contractor, sub-contractors, material suppliers and manufacturers to original and subsequent purchasers for the stated periods of time in the statute.  For conversions, per Florida Statute 718.618, assuming lack of adequate reserve funding, warranties extend solely from the developer to original and subsequent purchasers for the stated period of time in the statute.  Express warranties (warranties created by contract) extend for the period of time stated in the contract. Common law implied warranties  (warranties created by court decision), to the extent they are not disclaimed, extend from the developer to original purchasers for up to ten years.  Most developers effectively disclaim implied warranties in their contracts.  In order for a defect to be covered under a statutory or express warranty, it must be discovered during the warranty period.

b.  Statute of Limitations Expiration

Ordinarily, the statute of limitations for pursuing a warranty claim in court would be four years from date of discovery.  However, Florida Statute 718.124 provides that no cause of action on behalf of a condominium association accrues until transition of the Association to unit owner control (turnover).  Consequently, the statute of limitations for a condominium association pursuing a warranty claim is four years from discovery or four years from transition, whichever is latest, but in no case more than 10 years from issuance of the certificate of occupancy.  Express warranty claims can be pursued only by original purchasers and must be pursued within four years of date of discovery but in no case more than 10 years from the issuance of the certificate of occupancy.  A claim is preserved by filing suit, although placing a party on notice of a claim pursuant to Chapter 558, Florida Statutes has the effect of extending statutes of limitation for a finite period as defined in the statute.  A Chapter 558 notice, however, does not extend the limitations period for a building whose certificate of occupancy issuance is approaching its ten-year anniversary.

Florida Homeowner Association Warranties

a.  Warranty Expiration

There are no statutory warranties applicable to homeowner associations.  There is also no equivalent of Florida Statute 718.124 applicable to homeowner associations.  Thus, only common law and express warranties apply to homeowner associations.   Express warranties extend for the period of time stated in the contract. Common law implied warranties, to the extent they are not disclaimed, extend from the developer to original purchasers for up to ten years from the date of issuance of the certificate of occupancy.  Most developers effectively disclaim implied warranties in their contracts.  In order for a defect to be covered under an express warranty, it must be discovered during the warranty period.

b.  Statute of Limitations Expiration

The statute of limitations for pursuing a warranty claim in court is four years from date of discovery, but in no case more than ten years after the issuance of the certificate of occupancy.  A claim is preserved by filing suit, although placing a party on notice of a claim pursuant to Chapter 558, Florida Statutes has the effect of extending statutes of limitation for a finite period as defined in the statute,   A Chapter 558 notice, however, does not extend the limitations period for a building whose certificate of occupancy issuance is approaching its ten-year anniversary.

Casting for Journey to Paradise

Ertl & Kistemaker Business Law Group is proud to be a part of an inventive new project spearheaded by one if its clients.  If you have ever wanted to be in a reality TV show or have an interest in making history with cutting edge docudrama read below:

Casting for Journey to Paradise: *You DO NOT have to be an actress*
Saturday, August 20, 2011 from 10 am – 4 pm.
4600 Moody Blvd, Palm Pointe Clubhouse Palm Coast, FL 32164

Journey to Paradise is looking for intelligent women aged 24 to 65.

Cast chosen will be part of a reality TV show to be filmed in Bunnell, FL
Journey to Paradise we'll be taking a small group of women into a community much in need of growth and change. The women will work with the community to bring the much needed growth and change using teamwork and sustainable technology.

We're looking for women who are diversified, intelligent, compassionate and who want to help make a difference in the world one community at a time. Monologues not needed. We need to get a sense of who you are and how well you'll work as a team.

Construction Defects - Environment or the Builder??

“You love your home and then it turns on you," The New York Times reports one homeowner said when he discovered the foundation of his home was cracking, crumbling and moving. Repairing unstable foundations costs homeowners around $4 billion a year and that cost often is not covered by insurance.

Frequently, the shifting is the result of contractions and expansions triggered by soil drying out from lack of rain or being flooded by excessive rain.  Kate Murphy, writing for The New York Times, reports in "Shifting Soil Threatens Homes’ Foundations" that some experts believe these shifts are due to global warming.
But weather does not let builders, engineers and architects off the legal hook.  They are supposed to consider soil conditions and how that soil might expand and contract during dry and wet weather conditions in designing and building the foundations of homes and other buildings.

Florida Landscape Law

In 2009, as a response to severe droughts in the state, the Florida Legislature passed Senate Bill

2080. The Bill is now codified in Florida Statutes 720.3075(4).

The new law states that homeowner association documents "may not prohibit or be enforced so

as to prohibit any property owner from implementing Florida-friendly landscaping …"

Florida-friendly landscaping is defined in Florida Statute 373.185 as "quality landscapes that

conserve water, protect the environment, are adaptable to local conditions, and are drought

tolerant."

Further, the statute lays out the nine principles of Florida-friendly landscaping. The nine

principles are:

planting the right plant in the right place;

efficient watering;

appropriate fertilization;

mulching;

attraction of wildlife;

responsible management of yard pests;

recycling yard waste;

reduction of storm water runoff;

waterfront protection.

This law has a profound effect on the enforcement of homeowner association covenants, articles

and by-laws. The plain meaning of the statute is that restrictions which predate the law may now

be unenforceable.

In response to this new legislation, the Florida Extension Service has created numerous
publications written specifically for homeowner associations. The publications detail the law and
its implications.

Circuit Court Rules Housing Authority's Rent Payments Should Go to HOA

A recent ruling by a Palm Beach Circuit Court judge represents a potentially significant boon for Florida HOAs and condo associations that wish to collect the rent from Section 8 Housing Voucher program tenants who are leasing from unit owners who become delinquent in their monthly association fees. The municipal housing authority involved in the case declined to pay its share of the rent for the unit occupied by a Section 8 tenant, arguing that Florida Statute 720.3085(8) does not apply to them. The judge in this case ruled that the law does indeed apply to these types of government agencies and mandated that the West Palm Beach Housing Authority begin making the payments in question directly to the association.


Read more from Florida HOA Lawyer Blog