By: Dan Rich, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Few things generate more animosity and drama within a homeowners association, or HOA, than contested board of director elections. This tension may result in residents seeking legal action against the HOA in the form of an election contest. Sadly, most HOA residents have zero clue about the rules regarding an election contest; however, this article will hopefully shed some light on the basics surrounding HOA election contests in Florida.

So where do we begin? Florida law states that any election dispute or challenge in the homeowners association context must be submitted to mandatory arbitration with the Florida Department of Business and Professional Regulation, or DBPR.
The window for submitting an election contest is not open for long. Instead, Florida law provides that any person who wishes to challenge an HOA election must file their petition for arbitration with DBPR within 60 days of the election results being announced. The announcement almost always occurs at the election itself, which means that the clock starts ticking the second the meeting concludes.

Florida law goes on to provide that prior to filing an arbitration petition with DBPR, the resident must also provide his or her HOA with the following: (a) advanced written notice of the specifics regarding the dispute; (b) a written demand for relief, and a reasonable time for the HOA to provide said relief; and (c) notice of the resident’s intent to file an arbitration petition in the absence of a resolution. If the resident fails to comply with these three requirements, then DBPR will be forced to dismiss the election challenge.
Often times, the “written notice of the specifics regarding the dispute” is initially founded upon rumors, hearsay and mere hunches. To avoid basing your HOA election challenge on speculation, it is generally recommended that the disgruntled resident investigate the accuracy of the information prior to filing the arbitration petition with DBPR.

You may be asking yourself, why should I take the time to investigate? This answer is simple. Florida law provides that the prevailing party in a DBPR election contest is entitled to recover from the losing party all of his or her attorneys’ fees and costs.
To minimize this risk, Florida law provides that any resident of a HOA can inspect the official records of the association. Florida law mandates that election materials, such as ballots, proxies and the sign-in sheet be preserved for inspection by residents who request to review the documentation. Once a request is submitted the HOA must make all requested materials available within 10 days. Then, the requestor must take time to review the documents, which often times requires a time commitment based on the sheer amount of papers involved.

The importance of confirming the basis for any election challenge is imperative, but it narrows the 60-day timeframe that a resident has to file their petition. Therefore, that is why I recommend that

a resident seeking to challenge an HOA election, or an HOA facing an election challenge itself,
seek the advice of a knowledgeable attorney who can help navigate the complexities of an election
challenge under Florida law.

Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in
Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

By: Dan Rich, Esquire
Clark, Campbell, Lancaster & Munson, P.A.

Q: Can my homeowners’ association prohibit guests from using the clubhouse or swimming pool?

A: November brings with it crisp air, the smell of turkey, and jokes about how the palm trees never lose their leaves. However, November also means that many people will start flocking to their Florida residences to escape the frigid north.

In many instances, these homes are in residential communities controlled by a homeowners’ or condominium association.  Among other things, associations are responsible for the management of common areas within the community.  Under Florida law, a common area is defined as all real property within a community that is owned or leased by the governing association.  Examples of common recreational areas include tennis courts, clubhouses and swimming pools.

The only way to know exactly what rules apply to the use of such common areas is to review the applicable provisions of your community’s governing documents regarding guests and visitors.  The governing documents (which usually include a Declaration of Covenants Conditions and Restrictions, Declaration of Condominium and Rules and Regulations) are where you should look first to determine what rights your guests and visitors have to use any common recreational areas.  Some associations may limit use of common recreational areas to homeowners or unit owners and prohibit guests’ usage altogether. Other associations might allow guests to use common recreational areas only if accompanied by a homeowner or unit owner.  Some associations may allow non-owners to use the common recreational areas only after obtaining a guest pass or signing into a log book.

Florida’s warm weather offers the ability to escape the cold Northern weather and enjoy outdoor recreational areas during winter months.  However, before planning your next pool party, it is advisable to consult your community’s governing documents in order to know how many people you can include on your guest list.

The December 1st edition of “The Law” will cover proactive planning for senior Medicaid Programs.

Questions can be submitted online to thelaw@cclmlaw.com

By: Clark, Campbell, Lancaster & Munson, P.A.

 Q: When does a tenant become an owner for tax purposes?

 A: I “own” a condominium on unit on the east side of Santa Rosa Island in the Florida Panhandle, but I do not actually hold a deed.  Instead, because the island is county land leased to developers under 99-year master leases, I am the assignee of a lease to the unit.  Similarly, Island Resorts Investments, Inc., was subject to a sublease under one of these lengthy master leases on the west side of the island.  The developer brought a lawsuit against the county tax collector when the county started imposing property taxes on the tenant.  The developer argued that it was a tenant not subject to real estate taxes.  A trial court sided with the tax collector, but on appeal a panel of judges held that, primarily because the sublease agreement did not allow for the developer to either get automatic lease renewals or get a deed for a nominal price, the tenant did not have the sort of perpetual dominion rights typical of an owner.

The tax collector has vowed that the fight is not over, and a Florida Supreme Court ruling may be forthcoming, but the case raises questions of when a tenant can be a so-called “equitable owner.”  To understand why this is even a question, it is important to know that lawyers and courts consider ownership as a “bundle of rights,” and someone can have all or some of those rights.  You can have a right to exclusive dominion of a property, for example, but not the right to build on the land.  Or you can have the right to build but must turn over all improvements to another owner once you stop using the property for a specified purpose, upon the expiration of a specified term, or even upon a specified person’s death.  You may or may not have the right to sell or sublease the property you occupy.  If you have the entire bundle of rights, you are obviously the “owner” in all senses.  But if you have only some of the rights, the question arises as to what your responsibilities are, including as to real estate taxes.

In Florida, to be deemed an equitable owner for such tax purposes, a tenant must hold virtually all of the benefits and burdens of ownership, including the obligations to insure, maintain, and pay taxes (according to the lease).  Although these obligations are common in commercial leases, the key piece that makes equitable ownership uncommon is that the lease must either be perpetual or allow for the tenant to purchase the land for nominal value.  On the face of this rule, a lease with a purchase option could fall into this definition if the eventual purchase price is small enough.  Generally speaking, however, if the tenant’s right to occupy the property can be taken away at the option of the landlord or other legal owner at any time or at a specified time, as is the case in virtually all residential leases and most commercial leases, the tenant will not be an equitable owner with responsibilities directly to the state for property taxes.  Even if the tenant is not responsible to the government, however, the lease may require the tenant to pay the taxes, and the tenant must comply with his obligations under the lease.

Negotiating a lease and understanding your rights and responsibilities, including those not specifically set forth in the written agreement, should not be taken lightly.  Legal counsel can assist in the event a tenant or landlord has concerns over a residential, commercial, or land agreement.

The June 30th edition of “The Law” will cover the new collaborative law procedures for Florida family law cases and how the same concepts can be applied in business disputes.

Questions can be submitted online to thelaw@cclmlaw.com

By:      Dan Rich
Clark, Campbell, Lancaster & Munson, P.A.

Q: Can a homeowners association prohibit the display of political yard signs?

A: As the 2016 presidential election draws closer, it is inevitable that we all will start seeing political signs popping up everywhere. You will find them plastered in windows, at most, if not all, intersections, and probably even along the median of I-4. But, oddly enough, one place you may not see any political signs is in your yard if you happen to live in a homeowners association.

The majority of governing documents for homeowners’ associations prohibit signs of any type from being placed on owners’ lots. But you may be thinking, “Can my association legally restrict me from exercising my freedom of speech?” The short answer is yes, and this is why.

Freedom of speech applies only when there is what is called “state action,” or in simpler terms government action. Basically, freedom of speech prevents federal, state and local governments from restricting our speech or restricting actions that express our views. But homeowners associations are private, not government, actors and therefore may impose restrictions and regulations on speech that the government simply cannot. Furthermore, when you purchase a home in a community that happens to be governed by covenants and restrictions, you are essentially entering into a contract where you have agreed to abide by all those rules and regulations. What this means is that if you live in a community that regulates the public placement of signs, you have technically contractually agreed to forbid yourself from placing any signs on your property, including political signs.

While published Florida case law may not have addressed the issue of political signs directly, a 1989 appeals court decision involving Quail Creek Property Owners Association in Naples sided with the association over the demand for an owner to remove a “For Sale” sign from his front yard. The court held that the association was not a governmental entity and that there was no “state action.” Therefore, the enforcement of the sign restriction did not violate the owner’s free speech rights. While this decision relates to a “For Sale” sign, and not a political sign, it is important because it illustrated the courts deference to the homeowners associations’ rules and regulations when there is no “state action.”

Understanding whether you can proudly display your political signs as the election draws closer and the debates intensify is an interesting legal question that requires owners to review their community’s governing documents, and for the association itself to consider whether or not to amend its governing documents to add language regarding signs.

The May 19^th edition of “The Law” will discuss the effects of radon on property and particular concerns in Lakeland.

 Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@clarkcampbell-law.com

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: I am interested in purchasing property owned by a foreign person.  What do I need to know?

A: During the past few years, there has been an influx of foreign investors from Canada, Europe, and South America purchasing property in Florida.  While purchasing property in Florida can be a wise investment for a foreign person, anybody buying property from a foreign person should proceed with caution.

The Foreign Investment in Real Property Tax Act (FIRPTA) was enacted by Congress in 1980 to require foreign persons pay taxes on gains when selling property located in the United States.

Under FIRPTA, the buyer, and not the foreign seller, is required to withhold a certain percentage of the purchase price at closing and remit that amount to the Internal Revenue Service shortly after the closing.  In most closings, the buyer usually enlists the services of the attorney handling the closing to handle the withholding and remit the withholding along with certain required forms directly to the IRS on behalf of the buyer.

FIRPTA does not apply to a resident alien if the resident alien meets what is known as the “Green Card Test,” which, as the name implies, requires the foreign person possess a Green Card, or the “Substantial Presence Test,” which requires determining how long the foreign person has been present in the U.S. over a certain period of time prior to the closing.

A foreign person includes a nonresident alien, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person.

Recently some changes have been made to FIRPTA, and effective February 16, 2016, in some cases, the standard 10% withholding amount has been increased to 15%.

Most types of U.S. income received by a foreign person are subject to a federal tax of 30%, but a reduced rate or exemption may apply if there is a tax treaty between the foreign person’s country of residence and the U.S.  If the amount withheld exceeds the amount eventually due from the foreign person, the foreign person may obtain a refund from the IRS.

In some cases, if the buyer intends to use the property as the buyer’s personal residence, no withholding is necessary.  However, a buyer should beware of any foreign seller who is pressuring the buyer to claim the personal residence exception in order to avoid withholding if that is simply not true.  Under FIRPTA, the buyer’s liability can be up to the amount of tax to be withheld plus interest.  Furthermore, if the buyer willfully fails to withhold or notify the IRS, the buyer commits a felony and could face imprisonment up to five years and a $10,000 fine.
If you plan to purchase property owned by a foreign person, make sure the attorney handling the closing is familiar with FIRPTA, asks all of the right questions, and handles the withholding aspect if necessary.

The April 7^th edition of “The Law” will discuss how courts are handling foreclosures when banks lose the original mortgage documents.