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When Florida Homeowners Associations Have To Bring Claims against Developers

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Recently, one of the largest home builders in the nation lost a $16.3 million judgment to a condo association after the judge found that it had engaged in deceptive practices, leaving the association in poor financial condition.

The company—D.R. Horton—started developing the association—Majorca Isles Master Association in Miami Gardens—back in 2005, but decided to stop building when the recession hit. Because of this, many of the condo owners stopped paying their fees, resulting in a deficit for the association. In response, the directors appointed by Horton diverted funds to pay the expenses of the associations, breaching their fiduciary duty to the association, and ultimately shifting the economic loss of the company to the homeowners themselves by cutting services and amenities.

Developer Obligations to Associations

When Horton turned over management of all the associations to the homeowners in 2011, they had gaping holes in funding, leading to a Chapter 11 bankruptcy reorganization filing. The company also failed to keep detailed financial records and mischaracterized the income, recording unpaid assessments fraudulently as assets in order to give off the false appearance that the association was solvent, even though it was not.

This case highlights that developers have an obligation of fairness and transparency when it comes to Florida homeowners associations, and if corporate greed gets in the way of this, the courts will hold them accountable. Developers are ultimately responsible for predevelopment turnover when it comes to homeowners associations.

Florida’s Homeowner’s Association Law

Florida Statute 720 governs claims brought by Florida homeowners associations against developers. Some of the more common claims involve construction defects, property disputes, and financial irregularities. Homeowners associations are empowered to bring claims on behalf of their members with regard to issues that are of “common interest.” Typically, an association will first obtain an approval of a majority of the voting interests at a members meeting. However, it is important to go over any procedural requirements with an experienced association attorney, as there are often specific requirements included in an association’s governing documents which must be complied with before a claim can be brought against a developer.

In addition, under Florida law, all association funds held by a developer must be maintained separately in the association’s name, and developers cannot commingle any association funds with their funds or the funds of other associations.

Experienced Florida HOA/Condo/Property Management Lawyers

The Tampa & Sarasota homeowners and condominium association attorneys at HD Law Partners provide knowledgeable, experienced, and dedicated legal representation. Whether it is overseeing the everyday maintenance and contracts for a particular property or group of properties, or working to resolve a dispute and ensure that a homeowners or condo association is protected, we are here to work for you, and will ensure that you receive the professional legal services you deserve. Contact us today to set up a consultation.

Resource:

bizjournals.com/southflorida/news/2016/10/27/national-homebuilder-loses-16m-judgment-to-condo.html

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