Friday, February 28, 2014

Court case could increase cost for homeowners associations | HeraldTribune.com

Court case could increase cost for homeowners associations | HeraldTribune.com

"A pending opinion from the Florida Supreme Court could dramatically increase operating costs for thousands of homeowner associations statewide and substantially drive up condo owners' expenses. The looming decision is connected to a recent Florida Bar opinion that, if enacted, will force community association managers to hire attorneys to handle various administrative duties now done primarily in-house."

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The issue is that some of the things property managers do arguably constitute the practice of law.

2 comments:

pvtgov said...

This is easily solvable. Do what Arizona is doing -- make an exception for unlicensed and untrained managers to be an exception to UPL. See SB 1482 and HB 2695. And that's after the HOA managers were sanctioned in a 2012 SC opinion for numerous violations of UPL.

Oh yes, there are no provisions for education and licensing like with state certified paralegals who cannot represent HOAs in court. Nay!

IC_deLight said...

Not "arguably" but actually.
HOA management companies have been engaged in the unauthorized practice of law for many years in many states.
One example is the filing of "notice of lien" or "affidavit of lien".

There is no purpose to this document other than to cloud title to an owner's property. This is a "make up work" to "charge a fee" practice. The scheme typically goes like this:
Get the board to adopt a resolution permitting the management company to entangle junk fees with assessments through what is known as the "priority of payment scam". The management company diverts fees that would be paid to the HOA to management company junk fees in order to leave the homeowner "in arrears" on assessments. This triggers a series of other management (and aligned HOA attorney) fees. For example, the "arrearage" will now trigger a "late fee" payable to the management company (NOT the HOA!). The HOA attorney can send a worthless letter and tack on another $300. The management company then tacks on a title search fee and a fee for preparing and filing an affidavit of lien. These affidavits of lien affect title to real property and the preparation of these by a non-attorney is the unauthorized practice of law which has civil and criminal liability.

Often the management company's criminal activity is concealed because there will be no reference to the management company in the affidavit of lien. In addition, the forms prepared by the management company employees will provide a false capacity for the employee executing the document.

In Texas, civil liability for UPL is found at Gov't Code §83.01. The statue prohibits persons other than attorneys from receiving compensation directly or indirectly for the UPL. The civil penalty includes fees paid plus 3 times fees paid plus court costs plus attorney fees. Consider that management companies "backcharging" the homeowners are liable under the direct compensation provisions. Consider that management companies charging their client HOA corporation generally are liable to ALL members of the HOA under the indirect compensation provision.

One of the larger management companies in Arizona was busted for this in 2012 and it sent shock waves through the HOA industry. Florida has long held that what these management companies do is the UPL. Associa is presently lobbying in several states to carve out an exception for HOA management company employees to prepare these documents. However, this raises another issue that has not been addressed. Attorneys cannot demand indemnification from their clients for the attorney's own malpractice. Management companies, however, provide their unsophisticated ignorant clients with management agreements that demand indemnification. If management companies are going to be engaging in the practice of law then shouldn't their indemnification provisions be deemed void?

At any rate, one would think the greedy HOA attorneys would be fighting the greedy HOA management companies on this issue. Both factions are extremely greedy and the management companies are stepping onto HOA attorney turf.