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HURRICANE RECOVERY FOR ASSOCIATIONS
January 1, 2006
NOTE: The following articles are reprints from the 2001,
2002 & 2005 APM News. They are important reminders due to
the above average hurricane activity that we have
experienced
CONTRACTOR LIEN RIGHTS
Many associations find themselves in a dispute with
contractors because they do not comply with the Florida
Construction Lien Law (Chapter 713, Florida Statutes – The
Mechanic’s Lien Law). There are stories of community
associations who have paid roofers, painters all of the
required funds, received release of liens and final release
of lien, when the project was finished, only to receive a
notice of lien from a supplier of materials or labor that
they had never been paid from the contractor. This can be
very expensive for the association as they may be paying
for the same work twice!
The State of Florida Construction Lien Law is a mandatory
statewide legislation, which shall be enforced in every
jurisdiction throughout the State. Applicants for a permit
are required to provide information concerning the Owner,
Mortgage lender and the Architect/Engineer. In addition
the application has to have the Owners notarized signature
affixed.
A certified copy of the recorded Notice of Commencement
must be posted and maintained, along with the permit, from
the start of the job through the final inspection. The
State mandates that no inspections shall be approved
without this notice being posted. This requirement
applies to all permitted work regardless of building
valuation or funding (cash or credit) source.
What to do to protect your association – For your
protection, if you are planning to spend over $2,500 on
building or improvements, before your start building,
repairing or replacing, it is suggested:
You consult an attorney regarding the Mechanics Lien Law
before starting a major construction project. Make sure
that all requirements for recording and posting the “Notice
of Commencement” have been accomplished.
Before making any payments to your contractor, you should
get a sworn statement in writing that the contractor has
paid all the bills for your job.
If you have received a “Notice to Owner” from anyone, you
should require your contractor to get a sworn statement
from each such person stating that they have been paid for
all work done on your job. This should be done before
making any payments to your contractor.
If a Mechanics Lien is filed against your property, consult
an attorney immediately.
The Mechanics Lien Law (Chapter 713, Part I, Florida
Statutes) provides a method by which a contractor,
subcontractor, laborer, building material supplier,
architect, landscape architect, interior designer,
engineer, or land surveyor may claim a lien on real
property on which they have done work, or to which they
have furnished materials. If the lien is not satisfied,
your property may be sold to pay the lien.
What is it? A “lien” is a charge or encumbrance on real
property (land that is improved and the improvements
thereon, including fixtures), which must be satisfied by
the property owner to ensure clear title. “Attachment”
means that if a court finds a claim a lien valid, the
owners’ property may be seized and sold to satisfy the lien
if it is not voluntarily paid.
A “Notice of Commencement” is a notice, which is filed with
the Clerk of the Circuit Court in the county where the work
will be performed. The notice should not be recorded
before the construction or development mortgage is
recorded, but must be recorded before actual construction
begins. It contains detailed information on the property
owner, financing arrangements, and other specifics
regarding the construction project. If a performance bond
is to be posted, a copy of the bond must be attached to the
“Notice of Commencement”.
The owners’ responsibility – Before any construction
begins, and after the construction mortgage has been
recorded, the owner should take the following steps:
At the time application is made for a building permit, a
“Notice of Commencement” form may be created by the
Association’s attorney or obtained from an office supply
store.
Complete the “Notice of Commencement” form with the
required information and retain a certified copy.
After the building permit is issued, record the Notice of
commencement with the Clerk of the Circuit Court in the
county where the work
will be performed. If a performance bond is to be posted,
a copy of the bond must be attached at the time of, or
prior to, recordation of the “Notice of Commencement”.
Post the certified copy of the “Notice of Commencement” at
the job site. There is no requirement to post a copy of
the bond at the construction site.
An owner’s failure to comply with these requirements could
affect title to your property.
When can a lien be filed against your property? – There are
two instances, which can result in a lien being filed
against your property:
If you fail to pay your contractor for work performed, your
property can be subject to a Mechanics’ Lien filed by the
contractor.
If a laborer, subcontractor, or a person supplying
materials to your property is not paid and has given you a
“Notice to Owner” and your contractor fails to pay
laborers, subcontractor, or material man, they can file a
Mechanics Lien against your property. A “Notice to Owner”
is a written statement that gives you the name, address,
and description of the work to be done by the subcontractor
or material man. The steps to protect the association may
seem to be very involved but by following the Florida
Mechanics’ Lien Law, the association will be protected from
loss and potential delays in having any sales/transfers
take place.
ESSENTIALS OF AN ASSOCIATION SERVICE CONTRACT
Contracts for goods, services and repairs are a common
occurrence for community associations. Yet, even with this
common occurrence, there are always problems and disputes
that are associated with a contract. Many times, the
contracts do not spell out enough of the details that are
essential in a fair agreement. In all cases, the
association's attorney should review all details and
contracts prior to the association executing a contract.
By taking your time and making sure that the following
elements are integrated into any contract that the
association enters into, it should help to eliminate many
of the common problems associated with service contracts.
1. Changes to the contract, should be spelled out as to
how they will be handled, how they will be executed and
paid for by the parties involved with the contract.
2. Who is the point of contact for the parties involved?
This should be spelled out in order to eliminate people not
in power from interfering.
3. Any details that will help to delineate exactly what
should maintained or repaired should be included as an
exhibit to the contract. This would include any pictures,
maps, photos and drawings helping to clarify the written
word.
4. How will any disputes be handled. Will they be
addressed through litigation or arbitration? How will pay
for the expense of this procedure?
5. Proof of insurance should be provided in a prescribed
form prior to any work being performed. Also, as a
precaution, the association should be named as an
additional named insured in order to be notified
immediately of any change of status in the
contractors/vendors insurance status.
6. Both the contractors and association's responsibilities
should be spelled out in detail. This may include a
minimum amount of men or equipment that is required to be
on the job. Maybe it includes certain times and days that
the association must allow the contractor on the property
or certain preparation that the association perform prior
to the contractor starting their work.
7. The contract should provide details and specifications
in enough detail in order for the work to be accomplished
to both parties satisfaction. This would also spell out
any alternates to the work being performed in cases there
could any delays in materials.
8. There should always be a start date and a completion
date stated in the contract and what the penalties would be
to either party if there was a problem with the start or
end performance.
9. The termination of the contract should always be
defined by both parties and made a part of the contract.
10. The terms of the contract should always be spelled out
and defined. This would include any billing procedures,
when any payments are to be made and when any extras to the
contract should be billed and paid.
11. All warranties should detailed and spelled out and
agreed to. In addition, how quickly will the warranty work
be performed. How should the warranty item be declared to
the contractor. Any manufacturer warranty information
should also be attached.
By addressing the above issues and agreeing to the various
items with your contractor, an association can eliminate
most of the potential problems in your next service
contract.
TIME TO RETHINK HURRICANE PREPAREDNESS
In the wake of Hurricane Charley, Frances and Ivan, we need
to rethink our preparedness for hurricane and other major
emergencies. Associations, local governments, management
companies, sub-contractors, suppliers and other
professionals related to community associations, need to
realize that whatever plans that we had in place for
emergencies was inadequate. This is especially true for
multiple storms and/or slow-moving storms that cause
destruction in large areas that will overload the resources
of the public and private sectors in terms of preparedness
and post-storm clean-up.
Within days of the passing of Hurricane Frances, we saw
many associations that sustained roof, structural, common
area and landscape damages. For the most part,
associations were not prepared for damages and most are not
prepared for the resultant costs that now accompany the
post-storm clean-up.
Due to the lack of budgeting for emergency funds and storm
clean-up funds, many associations will now have to resort
to emergency special assessments, deplete any savings that
may be on hand or borrow from banks to help accomplish the
clean-up and repairs.
If the damage to your association was covered under your
Windstorm Policy, most associations do not have the funds
and/or made provisions to have the funds to make up the 2%
Windstorm Deductible. These funds will also have to be
made up in some fashion that was not budgeted.
Recently, the National Weather Service predicted that we
have entered into a period of “Above Normal Hurricane
Activity.” If this is true, and it seems to be, we need to
begin to make preparations and provisions for this future
heightened activity in terms of planning and budgeting.
In most cases, this will require increases in future
maintenance assessments and reserve funding.
It may make sense to hire structural engineers to evaluate
and survey your buildings and common elements and make
recommendations concerning their ability to withstand
various strength hurricanes. Are there items and elements
that can be changed, altered or retrofitted to strengthen
your building and structures? Have the engineer recommend
and evaluate these items and then act upon them, as they
may help to lessen any future damages and expenses.
To begin preparing, we need to educate our Membership on
the realistic costs on the planning for, actual preparation
of a storm and then for the cost of the post-storm
clean-up. Begin including in your operating budgets or
your reserves for the following items:
Pre storm labor
Pre storm tree trimming
Post storm labor
Post storm tree trimming & removal
Storm repairs
Repair items not covered under the “deductible”
(If not included in the Operating Budget, then establish
Reserves for these items)
We recommend that associations have reserves for these
items. After the reserve is in place, if we have a season
without a hurricane, the reserve would not have to be
funded until they were used. Whereas, if these items are
included in the operating portion of the budget, they need
to be included year after year. What happens if the funds
are not expended? Will this create a surplus that needs to
be returned to the owners? By this method, you have
defeated the purpose of saving for an emergency and having
the funds available immediately.
After Hurricane Frances many associations have been unable
to get contractors to respond to their needs quickly.
Should an association have emergency equipment, chain saws
available and supplies on hand to protect their residents
and common elements, etc.? Prior to the hurricane season,
should the association have contractors “on staff” or “on
retainer” in order to ensure that they will show up and
respond quickly in the preparation of a storm and in the
aftermath of a hurricane? This list of contractors would
include roofers, electricians, plumbers, landscapers, tree
trimmers, HVAC, irrigation and labor. Other contractors
might include screen, railing and gutter contractors, pool,
glass, sign, awning companies, elevator, generator and pump
contractors. When hiring or considering a contractor or
professional consultant for your association, it might be
wise to inquire about their emergency preparedness plans.
Do these contractors have the resources and labor to handle
a situation like Frances? If they will not be able to
respond to or be available prior to a storm, or after the
storm how can help you’re your association? At least
choose the contractor that also has a plan in place to
respond to your needs.
Finally, if associations are unable to or are unwilling to
budget for these expenses, then at least set up a
Line-Of-Credit with your bank, that could be used in case
of an emergency. In this way you can respond quickly to an
emergency without having a special assessment that is not
only time consuming, but at that point-in-time, difficult
for many to fund. Have credit cards for Home Depot or
Lowes available for supplies and materials for immediate
repairs. Have accounts set up with labor companies,
whereby you can call for day labor and pay later.
Prepare for the worst and hope for the best. But overall,
be prepared as well as possible.
We need to begin to prepare, plan and save for emergencies,
especially for future heightened hurricane activity or be
prepared to suffer the consequences and costs of being
complacent. We all know now what we have to do in the
future, it is the right thing to do in order to secure our
homes, protect our investments and our way of life without
too many disruptions.
Copyright 2007© Associated Property Management of the Palm Beaches, Inc.
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