FL Statutes Deny Developer Access To Funds To Defend Lawsuits!

An Opinion By Jan Bergemann 
President, Cyber Citizens For Justice, Inc. 

May 28, 2006

 

The HOA Task Force discussed it and agreed to the specific wording. This wording was included into Senate Bill 1184 and Governor Jeb Bush signed it into law on June 23, 2004. And everybody agreed that something effective had been created.

 

FS 720/303(8) ASSOCIATION FUNDS; COMMINGLING.--

(c)  Association funds may not be used by a developer to defend a civil or criminal action, administrative proceeding, or arbitration proceeding that has been filed against the developer or directors appointed to the association board by the developer, even when the subject of the action or proceeding concerns the operation of the developer-controlled association.

This had been one of my pet projects as a member of the HOA Task Force, because the developer of the association where I lived had used our association dues to defend his broken promises and the under-par work performed.  Sixty-three (63) homeowners had sued him -- to no avail.  Why?  Because the laws are weak and the developer had unlimited funds to defend his violations  -- the homeowners' money!

Even Joe Adams, attorney of the law firm of Becker & Poliakoff who sat next to me during the meetings of the HOA Task Force, was under the impression that we had created a good law, clear-cur and straightforward.  Adams wrote in his column in the Fort Myers News-Press on July 15, 2004 (quote): 

Limitation on Expenditures During Developer Control,

F.S. 720.303(8)(c): 

The law has been changed to state that association funds may not be used by a developer to defend legal proceedings filed against the developer, or directors appointed to the board by the developer, even when the subject of action or proceedings concerns the operation of a developer-controlled association. This provision is effective on October 1, 2004.

I guess everybody thought that was a clear statement.  Then Chris Draper, Joe Adams' colleague in the law firm of Becker & Poliakoff, obviously was under the impression that it might be more lucrative to find some flaws in the wording and come up with his own interpretation of the new law -- and maybe squeeze a nice profitable lawsuit out of an inventive interpretation.

Please see Draperís take on the paragraph dealing with the issue of a developer in control and his ability to use association funds to defend any litigation brought against the developer, or directors appointed to the board by the developer.

I'm not an attorney, but common sense tells me that in my opinion Draper twists the words to make the opinion look favorable for the people who are in charge of the check signing!   Although we had heard lots of different opinions during the discussion of this issue, not one of the opinions was as twisted as this one!

We all consider that the oldest profession in this world is selling oneís body.

How about the profession that's selling its ethics?


(SCANNED VERSION)


BECKER &     

POLIAKOFF

2500 Maitland Center Parkway

Suite 209

Maitland, Florida 32751

Phone: (407) 875-0955  Fax: (407) 875-3401

US Toll Free: (800) 232-5379

May 11, 2006

Reply To:

Orlando
Chris A. Draper, Esq.
Direct dial: (407) 875-0955
cdraper@becker-poliakoff.com

 

Amelia Park Neighborhood Association, Inc. 

c/o Property Management Systems, Inc. .

Attn: Kathy Maier, Manager

P.O. Box 1987

Yulee, FL 32041-1987

 

And

 

Mike Clemens, President

1705 Lake Park Drive

Fernandina Beach, FL 32034

 

Re:         Opinion on Section 720.303(8)(c), Florida Statutes

 

Dear     Board of Directors:

 

Please accept this written opinion from the Firm as to how Section 720.303(8)(c), Florida Statutes affects the use of Association funds in defending legal proceedings.

 

The statute provides that:

 

Association funds may not be used by a developer to defend a civil or criminal action, administrative proceeding or arbitration; proceeding that has been filed against the developer or directors appointed to the association board by the developer, even when the subject of the action or proceeding concerns the operation of the developer controlled association.

 

Therefore, the initial analysis is when does the statutory, prohibition get triggered.  It begins when an action or proceeding is "filed", and the action or proceeding must be filed against either (i) , the developer, or (ii) a director appointed to the board by the developer'.

 

If a proceeding is filed against the association, rather than against a developer or developer appointed board member then the statute, by its own terms does not apply.  

In support of this is the fact that Section 720.311(2)(a), Florida Statutes, states that "Disputes between an association and a parcel owner regarding amendments to the association documents...... and access to official records shall be filed with the department for mandatory mediation before the dispute is filed in court."

In summary, this was a dispute between the Association and the Hanolds, concerning the Hanolds' claims that the Second Amendment was not properly adopted and that they were denied access to records.  This resulted in the Hanolds filing a Petition for Mandatory Mediation with the Department of Business and Professional Regulation over those claims as a condition to being able to file suit in court over those matters.  The Association retained counsel to defend those claims filed against it.  Accordingly, the statute does not prohibit the use of association funds to defend the proceedings.

On a final note, if it were otherwise, the Association could be sued by an owner, prohibited from using its funds to defend itself, and if the developer did not agree to pay for the defense then the Association could end up with a judgment against it.  This would be a ridiculous result.  On the other hand, based upon our opinion, if some action is filed against the developer or a developer-appointed board member, the association cannot pay to defend the action.  This is acceptable because if the developer or board member does not pay for their own defense, a judgment could be entered against them; but not the association.

Should you have any questions please do not hesitate to contact me.

 

Very truly yours,

 

(Signature)

Chris A Draper

For the Firm

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