HOA, condo & co-op case law, litigation highlights (October 2018)

By Deborah Goonan, Independent American Communities

October 2018 highlights: some state laws won’t apply to your HOA; Associations hiring Private Eyes to collect delinquent dues; owners can’t sue the HOA attorney; California coastal access rights protected; updates to CA law with regard to construction defect lawsuits.

Some Florida statutes not retroactive

Florida palm trees

Depending on how their governing documents are written, older Floridian condo associations do not necessarily need to follow recently enacted laws with regard to termination of their associations. Surf Club Condominium is one example.

In this case, owners of four units are blocking a termination plan approved by the owner of 32 units, a developer.

But the Judge said that the developer can get around the condo documents’ unanimous consent to terminate. The developer could request a partition action from the court. If approved, the court would also decide how to best dispose of the disputed property and how to divide the value of the property to each individual owner.

Judge strikes condo developer’s plan to terminate beachfront condo for redevelopment

By Brian Bandell – Senior Reporter, South Florida Business Journal
Oct 17, 2018, 2:03pm
The plans by JMH Development Managing Partner Jason Halpern to terminate an older condominium in Surfside and redevelop the beachfront site as a luxury condo were dealt a significant setback in Miami-Dade County Circuit Court.

The developer’s plan to terminate the Surf House Condominium Association is not valid and the remaining four unit owners, out of 36 total units, can’t be forced to sell their condos to the developer, Miami-Dade County Circuit Judge Michael Hanzman ruled Oct. 16. That means the building at 8995 Collins Ave., which was constructed in 1966, will remain a condo for now.

In 2015, JMH Development affiliate Surf Club Condominium Views LLC acquired 31 units in the Surf Club for $55 million. It bought one more unit for $2.18 million in 2016, and filed a notice to terminate the condo association.

The developer can’t force the four units owners to sell it their condos based on appraised value, the judge ruled. It’s possible the property could be converted to “tenants-in-common” ownership, where the entire property would be sold to a third party and each unit owner would receive a proportional share of the price, the judge ruled.

“You can’t retroactively apply that change because, when you bought the property, you have a vested right in your property and someone can’t change rules of the game to deprive you of your fundamental property rights,” said Gunster attorney Mike Marcil, who represents the four condo owners. “If they bought the condo and under those rules unanimous approval was needed [to terminate], the association can’t just change those rules.”

Attorney Peter F. Valori, who represents the condo association, said the court did allow the property to be disposed through a “partition action,” where the condo owners would be treated as tenants-in-common.

Attorney Chad Tamaroff, who represents the developer, declined comment.

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Is your HOA hiring a Private Eye to track down your money?

Private Investigator PI magnifying glass faces
(Pixabay.com free image)

As an alternative to foreclosing on a property, homeowners and condo associations are garnishing wages or bank accounts in order to collect unpaid assessments, plus attorney fees and collections costs. But when the homeowner does not willingly provide account information, HOA attorneys are turning to Private Investigators to locate bank accounts in the homeowner’s name, and withdrawing the funds.

Documents show how law firm got one woman’s bank account information (GA)

October 12, 2018

By Danny Robbins, The Atlanta Journal-Constitution

When the lawyers for Connie James’ homeowners association garnished her bank accounts to recover delinquent dues, she was curious. She didn’t know how the accounts had been located, nor had she given anyone consent to access them.

More than a year later, her curiosity gave way to anger as she learned how the law firm found out. It had hired a private investigator who, in turn, discovered not only where her accounts were located but how much she had in them.

“I just felt violated,” she said. “That’s what I felt initially, and it’s what I feel to this day.”

What happened to James, a 61-year-old software designer, offers a rare look at how attorneys use private investigators and other so-called information brokers to obtain supposedly private financial information.

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See also

Think no one can know how much you have in the bank? Think again
AN AJC INVESTIGATION: Across the nation, dozens of companies are defying a decades-old law and the banks’ own safeguards and selling account information



WA homeowner wonders: How does a single $300 late payment turn into $8,000 in HOA late fees and attorney fees?

Unit owners aren’t clients of the HOA attorney

lady-justice-2388500_1920 attorney law
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Despite the appearance of an attorney conflict of interest, the Bewley v. Semler Opinion clarifies that a third party cannot sue an attorney.

In this case, the owner of a  unit in a condo association did not have sanding to sue the HOA attorney’s law firm for breach of contract. The court considers the unit owner a non-client, because the contract was with the condo association, under the authority of the condo board.

Supreme Court Case No. 16SC849

Justice BOATRIGHT delivered the Opinion of the Court.

¶1 R. Parker Semler, a member of a condominium association, filed a breach-of-contract claim against the law firm that employed the association’s attorney. In support of that claim, he alleged that the attorney had a contract with the association’s president not to represent one association member against another. He also alleged that the attorney had, on behalf of other association members he was representing, acquired a deed conveying ownership of parking spaces over which Semler also claimed ownership, thereby breaching the contract and damaging Semler.

¶2 The trial court dismissed the claim for lack of standing. A division of the court of appeals reversed, concluding that Semler had sufficiently alleged a breach-of-contract claim as a third-party beneficiary. In doing so, the division concluded that the strict privity rule, which “precludes attorney liability to non-clients absent fraud, malicious conduct, or negligent misrepresentation,” Baker v. Wood, Ris & Hames, P.C., 2016 CO 5, ¶ 1, 364 P.3d 872, 874, did not bar Semler’s claim.

¶3 We granted certiorari and now reverse. We conclude that the strict privity rule bars Semler’s breach-of-contract claim, meaning he lacks standing to assert it.

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New statute might not help owners in FL condo associations

Court law legal books gavel
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Here’s an important concept that can be difficult to explain to homeowners who think that new state law regulating association-governed communities will help to protect their rights as housing consumers or individuals.

Unless a new state law specifically says that it must apply to all existing associations, it might not apply, depending on various circumstances.

Basically, it comes down the what’s written in the Covenants & Restrictions, and, if CC&Rs are vague, judicial interpretation. Below is one attorney’s opinion on the issue, but he readily admits that legal opinions vary.

What does that mean for housing consumers? Expensive legal action may be the only way to determine whether your HOA has broken state law or not.

New Laws Don’t Always Apply

Becker& Poliakoff

Q: I read your recent column which gave your opinion that the new condominium law on board member term limits is not retroactive. With so many changes to the law every year, how are we supposed to know which new laws apply to us and which ones don’t? (L.S. via email.)

A: That is a very good question and one which is not easy to answer. Even attorneys who practice in this area of law often disagree on a particular issue. The starting point is the long standing legal rule of statutory interpretation that an act of the legislature is presumed to have prospective effect (not be retroactive), unless there is a clear legislative expression of a contrary intent.

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Legal settlement in 33-year-old legal fight over CA coastal rights

California beach ocean

According to a legal settlement with the California Coastal Commission, a San Diego County homeowners association, consisting of 75 properties, must pay to construct a public access trail to the beach, plus pay $540,000 in administrative penalties.

The orignal developer was supposed to build the trail in 1985, but walked away from his obligation due to financial difficulties. Since that time, the HOA had resisted complying with California law requiring public access to the coastline adjacent to Rosalena Owners Association.

Coastal Commission Settles 33-Year Fight Over Lagoon Trail

October 10, 2018 BIANCA BRUNO
SAN DIEGO (CN) – The California Coastal Commission got a reprieve from its typically hotly contested enforcement of the Coastal Act by homeowners Wednesday when it amicably settled a 33-year dispute over a lagoon access trail in Carlsbad.

The Coastal Act requires that the public be able to access California’s coasts. Developers violated the act by failing to build a public access trail on the bluff top of the Batiquitos Lagoon, which the commission required when it authorized construction of a residential community along the coast in north San Diego County in 1985. Since individual homeowners benefit from the original Coastal Development Permit, they were also on-the-hook for building the trail – and both homeowners and the Rosalena Owners’ Association settled the violations Wednesday.

In addition to building the trail, the homeowner’s association will pay $540,000 in administrative penalties to the nonprofit Batiquitos Lagoon Foundation, which will be used to fund acquisition of property for open space and public access purposes, school programs and other coast-related programs.

The homeowner’s association will also secure an additional easement to connect the trail to a network of existing trails – or face double fines for failing to do so.

Paul Zellerbach, former Riverside County District Attorney and Superior Court Judge, now serves as the president of the Rosalena Owner’s Association. Since he’s lived in the community the past year and a half, he said he helped “shepherd” the settlement with the Coastal Commission.

Zellerbach said even though most of the 75 homeowners in the community have lived there for less than 10 years and “were stuck with a bill” for previous noncompliance, they “understood and accepted responsibility to build the trail … to come to a fair and equitable solution.”

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Who’s responsible for infrastructure failure in these HOAs?

HOA, condo, co-op boards have a duty to investigate all types of construction defects

Builders construction workers
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A recent Supreme Court ruling clarifies that California law creates a legal obligation for an association’s board of directors to investigate potential construction defects, regardless of the presence or lack of damages or personal injury.

The implication is that association-governed community boards can be proactive about pursuing construction defect claims against developers and builders before someone gets injured, and before structural damage occurs.

New Case Law that Impacts the SB800 Process
Why McMillin Albany is Crucial for Associations

By Kyle Z. Pineo, Esq. (Berding & Weil, Attorneys at Law)


The Holding

The Supreme Court held that the homeowners were required to engage in the SB 800 pre-litigation procedures because SB 800 was the homeowners’ “virtually exclusive remedy” in a construction defect case. The opinion suggests that when a plaintiff sues a builder for residential construction defects, the plaintiff can only pursue a claim under SB 800 and cannot pursue common law negligence and strict product the liability claims regardless of whether defects cause property damage or personal injury. Although the Court noted that SB 800 allows plaintiffs to bring common law claims for breach of contract, fraud, or personal injury, it did not answer whether a homeowner could allege that the builder negligently failed to satisfy the SB 800 building standards. Instead, it indicated that regardless of what a homeowner alleges, she or he must go through the SB 800 pre-litigation procedures to pursue construction defect claims.

Why McMillin Albany is Crucial to Associations

Previously, when an association filed a claim against a builder for construction defects, it typically made at least two legal arguments. First, the association would make a statutory claim that the builder violated SB 800. Second, the association would make common law claims that the builder was, for example, negligent or strictly liable for damage at the development. Now, McMillin Albany seems to prohibit an association from pursuing some of the common law claims—negligence and strict liability. While the reduction in theories of liability suggests that McMillin Albany is detrimental to associations, it actually benefits them. McMillin Albany clarifies that builders must construct developments to the SB 800 building standards, so associations do not need damage to sue for construction defect. It also leaves open the argument that an association can be awarded attorneys’ fees if it demonstrates that the builder violated SB 800. Furthermore, it sheds light on a board of directors’ fiduciary duty to investigate whether builders have violated SB 800.

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