Enforcement of HOA Covenants......Effective October 1, 2004
 
Enforcement of HOA Covenants and
Resolution of HOA Recall and Election Disputes -
New Procedural Requirements For HOA’s
Effective October 1, 2004
 
This is the fourth of several articles that will
specifically address laws adopted by the
Florida Legislature which were summarized
 in our July 1, 2004 e-Lawyer.

    The following is an analysis of the new laws that will now require arbitration or pre-litigation mediation for HOA enforcement actions and recall and election disputes.

I. WHAT WE DO NOW:

    Until October 1, 2004, HOA’s will continue to go directly to court to enforce their covenants, restrictions and rules and to resolve recall and election disputes.

II. WHAT HAPPENS AS OF OCTOBER 1, 2004?

    Effective October 1, 2004, section 720.311 will require covenant enforcement actions and recall and election disputes to be handled as follows:

    A. COVENANT ENFORCEMENT ACTIONS:

        1. Requirement that Covenant Enforcement Disputes Be Mediated:

        New subsection 720.311(2)(a) will require that most covenant enforcement disputes be mediated prior to suit being filed by providing, in part, as follows (the form and language of the subsection has been slightly changed to better reflect its terms):

            Disputes between an association and a parcel owner regarding:

            1. the use of or changes to the parcel;
            2. the use of or changes to the common areas;
            3. other covenant enforcement disputes;
            4. amendments to the association documents;
            5. meetings of the Board and committees appointed by the Board;
            6. membership meetings not including election meetings; and
            7. access to the official records of the association.

shall be filed with the Department [of Business and Professional Regulation] for mandatory mediation before the dispute is filed in court. (Emphasis added.)

        2. What Is Mediation?

        In its simplest terms, mediation is a process whereby an independent and unbiased person assists the parties in arriving at a voluntary and acceptable resolution of the dispute. A mediator has no authority to decide the winner or loser of a case, nor does he or she have the power to force any party to enter into a settlement of a case against their will. If a matter is settled by mediation, then the written settlement agreement acts as a contract that can be enforced through the judicial process if necessary.

        3. What Is a 'Dispute'? Are Assessment Collection Matters Included?

        While subsection 720.311(2)(a) specifically establishes certain matters as 'Disputes', the language which requires the mediation of 'other covenant enforcement disputes' leaves open questions relating to the scope of this new requirement. For instance, an argument could be made that the non-payment of assessments is a violation of the covenants, thereby causing a 'covenant enforcement dispute'.  However, at this time, we are taking the position that assessment collections are not impacted by this new law and are recommending that only typical enforcement matters (e.g. failure to maintain) be taken to mediation.

        4. How Is the Mediation Process Started?

        Subsection 720.311(2)(a) provides that the mediation process is started by either the Association or a lot owner filing a written request (petition) with the Department of Business and Professional Regulation.  The Department is in the process of creating the necessary forms to be used for this purpose; however, as of today, its website advises that those forms will not be ready until October 1, 2004.

        5. Who Will Be Mediators and What Rules Must They Follow?

        Subsection 720.311(2)(a) provides that the disputes will either be mediated by persons who work for the Department or by private mediators who have been duly certified by the Department. Subsection 720.311(2)(c) establishes specific minimum standards that must be met by the private mediators.  No matter who is chosen to mediate the dispute, the mediation proceedings must be conducted in accordance with the applicable Florida Rules of Civil Procedure.

        6. What is the Cost and Who Pays for the Mediation Process?

        One of the weaknesses of this new law is that both parties (the Association and the violator) must share equally in all costs of the mediation, unless the parties agree otherwise. It is our belief that very few violators will voluntarily agree to pay these costs, thereby stopping the process before it begins. As more fully addressed below, there appears to be nothing in the law that addresses what happens if the violator refuses or is unable to pay such costs.

        Assuming, however, that a violator is willing and able to pay for these costs, they are to be paid as follows:

            a. The petitioner must send a filing fee of $200 to the Department at the time that the request for mediation is filed. This sum is credited to the final costs of the mediation process.

            b. At the conclusion of the mediation, the Department will determine the full amount of costs and will send a bill to the parties. If a Department mediator is used, it can include the salary and benefits of the mediator and any travel expenses incurred in those costs. There is no mention in the law of how and when the costs of the private mediator will be paid. Presumably, this will be addressed in the rules established by the Division.

        7. Who May Attend the Mediation and What Notices Must Be Given?

        Importantly, the new law provides for the above issues as follows:

            a. Persons who are not parties to the dispute may not attend the mediation conference without the consent of all parties, except for counsel for the parties and a corporate representative designated by the association.

            b. When mediation is attended by a quorum of the Board, such mediation is not a board meeting for purposes of notice and participation set forth in section 720.303.

        8. What if the Mediation Succeeds?

        If the mediation succeeds, the matter will have been resolved to the mutual benefit of both the Association and the homeowner and no further action will be required except to notify the Department, pay the mediator and comply with the settlement agreement (e.g. mow and trim yard).

        9. What if the Mediation Fails?

        If the mediation fails, subsection 720.311(2)(b) states as follows:

If mediation as described in paragraph (a) is not successful in resolving all issues between the parties, the parties may file the unresolved dispute in a court of competent jurisdiction or elect to enter into binding or nonbinding arbitration pursuant to the procedures set forth in s. 718.1255 and rules adopted by the division, with the arbitration proceeding to be conducted by a department arbitrator or by a private arbitrator certified by the department. If all parties do not agree to arbitration proceedings following an unsuccessful mediation, any party may file the dispute in court.

        10. Confidentiality of Mediation Process:

        One of the concerns raised relating to the use of the mediation process is the fear that things said during the mediation process may be used against that person if the mediation fails. Section 720.311(2)(a) addresses this fear using the following language:

... these [mediation] proceedings are privileged and confidential to the same extent as court-ordered mediation. An arbitrator or judge may not consider any information or evidence arising from the mediation proceeding except in a proceeding to impose sanctions for failure to attend a mediation session.

        11. What if the Violator Refuses to Participate in the Mediation Process?

        The main flaw to this new requirement is its failure to prescribe the steps to be taken if the violator refuses to participate in the mediation process. Presumably the Department will generate rules and regulations addressing this question; however, at this point it appears to us that most violators will not voluntarily participate in this process, especially based on the requirement that they pay one-half of all mediation expenses. Perhaps the rules that will be adopted by the Department will add guidance as to this issue.

        12. What About the Statute of Limitations?

        Because the new mandatory mediation process will delay the judicial enforcement of the covenants, section 720.311(1) provides that the Statute of Limitations period will be tolled during that process.

    B. RECALL DISPUTES:

        1. New Recall Requirements:

        Section 720.303 (10) was added by the 2004 legislature to mandate the methods and procedures that must be followed to recall HOA directors. While the specific requirements for recalls are beyond the scope of this article, this new statute is virtually identical to the requirements for condominium associations found in Chapter 718.

        2. Requirement that Recall Disputes Be Arbitrated:

        Consistent with the new recall requirements, new subsection 720.311(1) requires that all disputes concerning the effectiveness of a recall action must be filed with the Department and resolved by mandatory binding arbitration using the standards contained in sections 718.1255 and 718.112(2)(j) and the rules adopted by the Division of Florida Land Sales, Condominiums, and Mobile Homes.

        3. Who Pays for the Arbitration?

        While subsection 720.311(1) is not a model of clarity, it appears to provide as follows:

a. The party filing the petition must remit a filing fee of at least $200 to the Department.

b. At the conclusion of the arbitration proceeding, the Department will determine the amount that is adequate to cover all costs and expenses incurred by it in conducting the arbitration proceeding.

c. These fees, along with the reasonable costs and attorney’s fees of the prevailing party, will then become a recoverable cost.

d. The Department must adopt rules to implement the above requirements.

    C. ELECTION DISPUTES:

        1. Requirement that Election Disputes Be Arbitrated:

        New subsection 720.311(1) also requires that all election disputes be filed with and resolved by mandatory binding arbitration using section 718.112(2)(j) and the rules adopted by the Division of Florida Land Sales, Condominiums, and Mobile Homes.

        2. Who Pays for the Arbitration?

        The payment of the arbitration fees and costs is the same as provided for above with recall arbitrations.

    D. EDUCATION PROGRAMS:

    In what will hopefully be a useful tool for all persons affiliated with HOA’s, subsection 720.311(3) requires that the Department create educational material to assist in the understanding and use of the above-described process. The applicable language found in that section is as follows:

The department shall develop an education program to assist homeowners, associations, board members, and managers in understanding and increasing awareness of the operation of homeowners’ associations pursuant to chapter 720 and in understanding the use of alternative dispute resolution techniques in resolving disputes between parcel owners and associations or between owners.... The expenses of operating the education program shall be initially paid by the monies and filing fees generated by the arbitration of recall and election disputes and by the mediation of those disputes referred to in this subsection.

    E. CONCLUSIONS:

    While the intent of the legislature to expedite the resolution of HOA enforcement disputes is laudable, the methodology used is both cumbersome and impracticable. On the other hand, the requirement that recall and election disputes be resolved through mandatory and binding arbitration is, in our opinion, a step in the right direction.

    As you will note, many of the above requirements will be addressed by rules and forms to be adopted by the Division of Florida Land Sales, Condominiums, and Mobile Homes. Therefore, until those rules and forms are adopted and used for some period of time, we will all be treading new ground.

The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne and Daytona Beach, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice.


©2004 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached at 407-660-1040.
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