Magnolia N. Prop. Owners Ass’n, Inc. v. HeritageComm. Inc., No. 4943.

A property owners association (POA) filed suit for construction defects in a condominium complex. Appellants are three corporations: HCI (parent corporation), HMNI (seller) and Buildstar (general contractor).  HCI created separate corporations for every development it constructed for the purpose of operating as cost centers. HMNI was the cost center for Magnolia North POA and Buildstar supervised construction at Magnolia North.            

The POA board of directors initially consisted of officers of the Appellant corporations.  During this time, unit owners discovered various construction defects. The officers assured POA members that the defects would be timely cured.  The POA filed suit after turnover of the board from the developer to the unit owners. The POA asserted causes of action of negligence, breach of express warranty, breach of warranty of workmanlike services, and breach of fiduciary duty.  The court affirmed the jury’s award of $6.5M in actual damages and $2M in punitive damages. 

Amalgamation

Amalgamation is a theory of holding a parent corporation liable in place of its subsidiary where evidence shows that corporate interests, entities and activities are blurred to the point that separate legal distinctions can be ignored.  This is not piercing the corporate veil, as fundamental unfairness and fraud are not required elements. The court compared the instant case with Kincaid v. Landing Devel. Corp. where amalgamation was found between three distinct corporations.  In the instant case, the court pointed to the following facts for upholding the trial court’s finding of amalgamation:

1.     HCI, HMNI and Buildstar “shared officers, directors, office space and a phone number”

2.     The corporations shared employees

3.     HCI held itself out to the POA as the corporation responsible for construction defects in its written warranty

 Equitable Tolling

A three-year statute of limitations applied to the POA’s causes of action. Appellants argue the statute of limitations started when construction defects were discovered, marked by the POA’s first meeting on March 8, 2000.  The court disagreed and held that the statute did not begin to run until the date of turnover.

The court relied on the recent case of Hooper v. Ebenezer Senior Svcs and Rehab. Ctr., where the supreme court described equitable tolling as a “doctrine to suspend or extend the statutory period to ensure fundamental practicality and fairness . . . It has been observed that equitable tolling typically applies in cases where a litigant was prevented from filing suit because of an extraordinary event beyond his or her control . . . To deny [equitable tolling] would permit one party to suffer a gross wrong at the hands of the other.”

The POA board consisted of the corporations’ officers until turnover, so it is unreasonable to expect that the POA would have brought suit before the homeowners gained control of the board. As soon as turnover occurred, the POA promptly filed suit.  The court upheld the trial court’s ruling on equitable tolling.

Equitable Estoppel

The Appellant corporations were equitably estopped from asserting the statute of limitations as a bar to the POA’s claim because the Appellants induced the POA’s delay in filing suite.  The court held that deceit is not an essential element of estoppel; it is enough that the party “reasonably relied on the words and conduct of the party to be estopped in allowing the limitations period to expire.”  Appellants assured the unit owners that the construction defects would be repaired, so it was reasonable for the unit owners to give the Appellants time to make good on these promises before filing suit. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter. 

Parc Central Aventura E. Condo. v. Victoria Group Serv., LLC, 54 So. 3d 532 (Fla. Dist. Ct. App. 2011).

A Florida court of appeals determined that a company providing cleaning, concierge and security services to a condo association could not foreclose on individual units when the association failed to pay $290,737.27 for services under three separate contracts.  The trial court issued a judgment in favor of the maintenance company and an order of foreclosure on the basis that the individual owners consented to and authorized the services through the contracts entered into by the association. The trial court relied on Florida’s mechanic’s lien statute to order the foreclosure of condo units.

On appeal, the court held that the maintenance company did not have a valid lien under the mechanic’s lien statute.  The court held that the services provided by the company were not permanent improvements, and maintenance of property is non-lienable.  Under Florida’s Condominium Act, “if a valid lien encumbers multiple condominium parcels, each owner of an encumbered parcel may exercise the rights of a property owner . . . .”  The court reversed and remanded the case with instructions to issue a monetary judgment instead of foreclosure.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

In 2010, the Department of Justice (DOJ) issued revised requirements for the Americans with Disabilities Act (ADA) regarding accessible swimming pools.  In light of these new regulations, many community associations have approached me with questions regarding their association’s compliance.  This article seeks to address those concerns and provide a brief summary of the scope of the 2010 Standards for Accessible Design.

The ADA strives to provide equal opportunity to people with disabilities.  Title II of the ADA applies to state and local government services and Title III applies to public accommodations and commercial facilities.  The updated swimming pool accessibility provisions are intended to affect all newly constructed, altered and existing swimming pools with very limited exceptions.  However, privately owned community associations are generally not encompassed under the ADA. 

Title III defines a public accommodation as a facility owned by a private entity whose operations affect commerce. In order to fall under the purview of the ADA, a community association must be engaged in commerce.  This would include, by way of example, selling memberships to the general public, providing a place of lodging to the public (e.g. hotels, “condotels,” and resorts), offering swimming lessons to the general public, or hosting swim meets or events where the public is invited to access the pool.

           
If the community association is a public accommodation, there must be an accessible means of entry and exit on all newly constructed and altered swimming pools, wading pools and spas on or after March 15, 2012.  Existing pools must be brought into compliance to the extent that it is readily achievable on or after March 15, 2012.  This readily achievable standard takes into consideration financial constraints and overall feasibility.

                       
Larger pools, those with more than 300 linear feet of pool wall, are required to have two accessible means of entry, one of which must be a sloped entry.  Smaller pools are only required to have one accessible means of entry, which can be either a lift or a sloped entry.  Public accommodations also must consider maintenance and staff training as it relates to the accessible features.  Tax credits and deductions are available through the IRS for small businesses making these accessible means of entry.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

H. 3295 is a bill introduced in the House on January 12, 2011 and signed by Governor Haley into law on June 17, 2011. This bill authorizes homeowners associations to hold state licenses to sell alcoholic beverages. In order to meet the definition of a homeowners association under H. 3295, the association must be chartered as a nonprofit by the Secretary of State and “conduct[ ] a business bona fide engaged primarily and substantially in the preparation and serving of meals or furnishing of lodging.”  Prior to the enactment of H. 3295, the Department of Revenue ruled that homeowners associations were not entitled to alcoholic beverage licenses. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Although the SC Nonprofit Code and the governing documents of an association maintain safeguards for fair elections, many boards are coming up with crafty ways to ensure re-election. An article in the Orlando Sentinel lists these as the most popular methods for power-corrupt boards to hold on to their seats:

1. Create a Nomination Committee, stacked with spouses and friends of the sitting board members. They plainly nominate the sitting board members – nobody else -- and the ballot mailed out to the eligible voters will only contain the names of the “wanted” candidates, because the committee declares every other candidate who volunteers not fit to serve. Any owner trying to “nominate himself or herself as a candidate for the board at a meeting” has anyway no chance. The written mailed-in ballots already give the sitting board members the votes necessary for re-election.

2. HOA elections normally require a quorum of 30% of the total voting interests present in person or by proxy. 30% is quite a high hurdle, and the proxies collected by the board will only be used if it serves the advantage of the sitting board. It’s much easier to declare: “No quorum present” – therefore the old board is the new board.  Before anybody can object, the board and its supporters quickly leave the meeting room. Election won – no matter how many of the other owners complain about procedure.

3. Mail out general proxies, claiming these proxies only serve the purpose to fulfill the quorum requirements. But since they are actually made out as general proxies, they can be used by the board secretary to count as votes – if necessary.

4. Intimidation is another often used method to swing the election. Sitting board members go door-to-door to “collect” proxies with themselves named as proxy- holders. Especially the many elderly will often sign the proxy, just to live in peace. Violation letters and fines are the common threats used to “convince” the owners who are not voluntarily willing to sign over their voting rights!

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.