Eady: Underlying problem alarms a condo buyer


Q: I am currently renting a ground-floor condominium unit in an established community. My landlord wants to sell and do so quickly, but there is one big issue that looms large.

About a year ago, when the unit was vacant, the sewer backed up into the unit and into at least one other ground-floor unit. The second-floor units were not affected.

The association had the sewer flushed, which resolved the issue for the time being, but because the pipes are old (1978) and rusty, the association knows the sewer will need to be replaced at some point. The board has had all the sewers tested, and the unit I am renting is one of four that will need to be redone. The board will not do anything until the problems arise again, which is anyone’s guess. Then the board will “fix it the right way,” which would involve entering my unit, digging up the floors in both bathrooms, and, in at least one and possibly both bedrooms, in order to get to the bathrooms and access the whole pipe.

The sewer serves several units, but runs beneath only the unit I am renting, so my home will be the only one to be dug up. The association says it is only obligated to bring the unit back to a bare cement floor in the areas that must be chopped up to make the repairs, and that other repairs and restorations to the unit are the responsibility of the unit owner (e.g. carpet, tile, drywall, etc.)

My landlord says Florida law takes precedence over association rules, and that Florida law provides that the association is responsible for any damage to the inside of the unit during this process.

Obviously, if I buy the unit, when the issue arises it probably will involve hiring a lawyer and perhaps a lawsuit to get the association to pay for it, if indeed that’s how the law reads.

Can you tell me who bears responsibility in this situation for repairs to interior damage done to carpeting, tile and perhaps to vanities, toilets and other unit improvements during the sewer replacement?

Also, it is estimated that the person living in the unit would have to vacate the unit for six weeks while the work is being done. Who is responsible for paying for that?

I very much enjoy your column and have encouraged several people to write to you. You have provided valuable advice. Never thought I would be writing for myself, though! — P.F., Sarasota

A: Thank you for writing. Because I am a lawyer, I must start with a disclaimer: I write about general legal principles that are subject to change from time to time.

Nothing that I write is an adequate substitute for a thorough legal review by an attorney who is not only familiar with those legal principles but with the detailed facts of the situation, including the governing documents for the community in question. If the “devil is in the details,” that is never more true than in evaluating and resolving community association disputes.

I think you are lucky that you have the information that you do have in deciding to purchase a unit that is almost 40 years old. From the information you provided, it seems unlikely that the sewer replacement would be considered an “insurable” event as opposed to a maintenance repair or replacement.

As an example, if I own a home with a roof that begins to leak after 20 years of useful life, I probably do not have an insurance claim.

The sewer problems you describe do not seem to fall under the definition of a “casualty” (i.e. a sudden and unexpected occurrence), which would trigger coverage under the association’s property insurance policy.

In the absence of a casualty, the provisions of the condominium documents that deal with incidental damage to units caused by work performed by the association generally prevail. It would be rare for an association to have to pay to provide substitute accommodations while the unit is uninhabitable because of repairs.

I would caution you not to solely rely on statements made by your landlord, who, you admit, wants to sell and sell quickly. If you are truly interested in purchasing this unit, you need legal counsel now, not when you have already bought the unit, and possibly a lawsuit as well.

Although the law of “caveat emptor” (buyer beware) has been eroded somewhat as it applies to the sale and purchase of Florida residential real estate, you would be walking into the transaction with eyes wide open, based upon the information already in your possession. Proceed with caution.

Q: Our condo association has had a policy for at least the last 10 years which provides that in the event of an assessment delinquency, the delinquency is carried on the balance sheet as an account receivable until that delinquency reaches a final conclusion.

That conclusion might be a short sale, a foreclosure, or the owner may ultimately pay it off. If the “conclusion” results in a balance still due, owners are provided the option of accepting a special assessment for the balance or paying down the deficit over several years, with an added line item in the budget to provide funds to do so.

We have been using a line of credit which we have tapped at various times through the years (especially during the recent housing and economic recession) to keep all services provided and to guarantee all bills are paid promptly.

Now, a new president has been elected to the board, and he claims we have been violating Florida law all along.

He cites a provision that states that “assessments shall be made against units not more frequently than quarterly in an amount which is not less than that required to provide funds in advance for payment of all the anticipated current operating expenses and for all the unpaid operating expenses previously incurred.”

Have we been in violation of the law all this time?

I know of more than one other condo association which has done the same thing in the past. — A.S., via email

A: It is not illegal for a condominium association to borrow money for the payment of proper “common” expenses unless the condominium documents expressly prohibit the practice. In fact, a good set of condominium documents should specifically authorize the board to borrow money for proper purposes.

That said, I think it is a good business practice for an association to be extremely conservative when it comes to borrowing money and pledging the assets of the association for repayment. I am well aware that unit owner delinquencies have created a cash crunch for many associations, and a line of credit can cover short-term shortfalls, enabling a continuation of service levels that everyone wants and expects.

The key to me is “short term.”

I am not a big fan of associations undertaking long-term loan obligations, partially for the provision in the law that your new president has cited, but also from a more practical prospective. As the old saying goes, “You can pay me now or pay me later.”

The problem with paying later is that it comes with interest and other banking fees. And when an association borrows money to cover budget deficits, isn’t it really borrowing from itself? Isn’t the piper going to have to ultimately be paid?

Because the issue has been raised at the board level, it seems like the board needs some legal and accounting advice to determine the best strategy for budgeting and borrowing money in the future.

Tamela Eady is a Florida Bar board-certified real estate attorney with 25 years’ experience. She concentrates her practice on community associations and real estate. The subjects discussed in her columns are not intended as specific legal advice to anyone and are subject to principles that may change. Questions may be modified for clarity or for brevity. Email questions for possible inclusion in a future column to tke@eadylaw.com.


Tamela Eady

Tamela Eady is a Florida Bar board-certified real estate attorney with more than 25 years experience, concentrating her practice on community association and real estate legal matters. The subjects discussed in her columns are not intended as specific legal advice to anyone and are subject to principles that may change from time to time. Questions may be modified for clarity or for brevity. Email questions for possible inclusion in a future column to tke@eadylaw.com.
Last modified: January 25, 2014
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