ENFORCEMENT OF COVENANTS
This edition of the e-Lawyer is the third in a multi-part series which will address the enforcement of the covenants that regulate deed restricted communities (e.g. HOAs and Condominiums). For purposes of these articles, the term 'covenants' will include the restrictions found in Declarations, Articles of Incorporations, By-Laws, Rules & Regulations and Architectural Guidelines. These e-Lawyer articles, will not, however, address issues relating to the non-payment of assessments.
In Part I (Volume V, Issue 4), we addressed the various options that may be available to community associations to enforce their covenants.
In Part II (Volume V, Issue 5) , we addressed the mediation/litigation process that is now required for the enforcement of HOA covenants.
In this Part III, we will address the arbitration process that is required by Chapter 718, Florida Statutes, for the resolution of most condominium disputes.
Section 718.303(1), Florida Statutes, allows Condominium Associations to ultimately sue members, tenants, guests, and invitees when they violate the governing documents, the rules or Chapter 718. However, from and after 1999, Section 718.1255 has required that most such disputes first proceed through the following described mandatory, non-binding arbitration process before a lawsuit can be filed.
ARBITRATION VS. MEDIATION:
In Part II of this series, we discussed the Chapter 720 requirement that HOA disputes first proceed through a mediation process. In that article we pointed out that mediators are independent, unbiased third parties who work with the Associations and the violators in an attempt to find some mutually satisfactory way to resolve the dispute. A mediator may not make decisions or issue final judgments or orders.
In this part of the series, we move to the concept of arbitration. Unlike mediators, arbitrators are similar to judges and have the full authority and duty to decide who is right and who is wrong and to issue judgments and orders.
MANDATORY BUT NON-BINDING ARBITRATION:
In 1999, Section 718.1255 introduced the concept of 'mandatory non-binding arbitration' to condominiums. From a practical standpoint, this concept creates the following two step process:
a. If the violation is a 'dispute' as defined below, it must first go through a mandated arbitration process; however,
b. If either party is dissatisfied with the arbitrator’s final decision, they may then take the same matter to the state court system, so long as they do so promptly.
MATTERS THAT MUST BE ARBITRATED:
The matters that must be arbitrated are defined in Chapter 718 as 'disputes'. From a practical standpoint, this means that all matters must be arbitrated except the following:
1. Matters concerning the title to units or common elements;
2. Matters concerning warranties;
3. Matters concerning assessments;
4. Evictions of tenants;
5. Disputes between unit owners;
6. Questions relating to the fiduciary duty of board members; and
7. Damage claims relating to the Association’s failure to properly maintain units or the common elements.
SUMMARY OF THE ARBITRATION PROCESS:
Section 718.1255, Florida Statutes, and Chapter 61B-45, Florida Administrative Code, require the following arbitration process:
1. First, at least one letter must be mailed to the alleged violator. That letter must, at a minimum, meet the following criteria:
a. Be properly addressed;
b. Identify the alleged violation;
c. Describe the required cure;
d. Provide the time period for the completion of the cure; and
e. Warn of the consequence of the failure to comply.
This step was already required by Florida case law, so no additional burden was imposed on Associations by this required step. While only one letter is legally required, prudence dictates that at least two letters be mailed, with at least one of them being sent by certified mail.
2. If the violation is not cured, the Association then prepares a Petition for Arbitration using a form promulgated by the Division of Florida Land Sales, Condominiums and Mobile Homes of the Department of Business and Professional Regulation ('Division'). In the Petition, the Association must set forth:
a. A statement of facts, explaining its claim;
b. The legal basis for the claim;
c. The relief it is requesting; and
d. The pre-arbitration steps that were taken in an attempt to resolve the dispute.
In effect, the Petition contains the same information that would have otherwise been included in a Complaint for Injunctive Relief to be filed in court.
3. The Petition, along with a copy for each Respondent, is then sent to the Division along with a filing fee in the amount of $50.00.
The Division reviews the Petition and determines if it is a 'dispute' and whether it meets the technical requirements of the Administrative Rules. If the Petition does not qualify, the Division will simply refuse to accept the case. If, however, the Petition does quality, the assigned arbitrator will serve a copy of the Petition on each Respondent by personal service or by certified mail.
4. Once served, the case is prosecuted in much the same way as a lawsuit (e.g. motions, answers, discovery). However, the Administrative Rules are specifically designed to allow the cases to move forward very quickly. In fact, arbitrators can, and some times do, issue Summary Final Orders if they believe that one of the parties is clearly correct.
5. Ultimately, the arbitrator will schedule a 'trial' at which time both parties present their case. Many times such trials are conducted via teleconference. At the conclusion of the trial, the arbitrator issues a Final Order, and sends a copy of the Order to all parties.
POST ARBITRATION ISSUES:
The following two post arbitration issues must be acted upon promptly by the parties, or important rights will be lost:
A. Attorney’s Fees:
Section 781.1255 provides for the prevailing party in an arbitration case to be awarded their attorneys fees and costs. However, if the prevailing party does not file their Motion for Attorneys Fees and Costs within forty-five (45) days from the date of the Final Order, they will lose this important right.
Fair or not, the Division has taken the following positions relating to the award of fees and costs:
a. If the Association prevails, the requested fees and costs will almost always be reduced based on the concept that Associations have more assets than the individual unit owners; and
b. If the violators prevail, the requested fees and costs typically will not be reduced based on the same concept.
B. Appeal of Final Order:
If either party is dissatisfied with the Final Order, they have the right to file the same case in the state court system; however, unless they do so within thirty (30) days from the date of the Final Order, this right is forever lost. This filing is referred to as a 'trial de novo'.
If neither party files for trial de novo within the thirty (30) day time period, the arbitrator’ Final Order becomes legally binding on all parties and is enforceable in the state court system.
If either party disagrees with the Arbitrator’s Final Order and files a trial de novo action, the litigation process for that matter will be the same as outlined in Part II of this series.
In Part IV of this series we will discuss attorneys fees and costs.
The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne, Tampa and Palm Coast, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition was 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.
©2006 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached Toll Free at 1-800-395-6235 or locally at 407-660-1040.
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