|FL Statutes Deny Developer Access To Funds To Defend Lawsuits!|
An Opinion By Jan Bergemann
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.
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):
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!
all consider that the oldest profession in this world is selling oneís
about the profession that's selling its ethics?
Amelia Park Neighborhood Association, Inc.
c/o Property Management Systems, Inc. .
Attn: Kathy Maier,
Lake Park Drive
Beach, FL 32034
Re: Opinion on Section
720.303(8)(c), Florida Statutes
Dear Board of Directors:
accept this written opinion from the Firm as to how Section
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.
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'.
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.
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
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
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
you have any questions please do not hesitate to contact me.
Very truly yours,
Chris A Draper
For the Firm