Last Update: 03/16/16
Condominium living is a dream come true for many South Floridians, especially those who move here from other parts of the country as retirees or owners of vacation getaways. However, as with all things in life, there are pros and cons with condo living – and for condo unit owners, the ease and convenience of the condominium lifestyle brings with it the need to get along with neighbors who share common areas, common walls, as well as the reality that owners must deal with their Condo Boards.
Condominium Boards and Condo Assessments
In Florida, the board of directors of a Florida condominium company (the “Condo Board”) has the power to assess fees that must be paid by the individual condo unit owners (see Florida Statutes Sections 718.103(1) and (24) and 718.112(2)(g)). There are two kinds of condo board assessments: “regular assessments” and “special assessments.”
Regular Assessments vs. Special Assessments
Regular assessments are easily understood: they are the fees that are needed from all the condo owners in order to pay for the usual condo budget expenses (e.g., common area needs like pool maintenance, etc.). Special assessments are everything else: if there is a need for money to cover something other than the usual condo budget expenses, then the Condo Board must meet and approve this special expense as well as collecting the money to pay that expense via a special assessment.
The specific purpose for any proposed Special Assessment must be detailed in written notices to the condo owners that are served or delivered according to recognized delivery methods (no hiding the notice in the laundry room, for example). What kind of say the condo owners themselves get in the special assessments decision depends upon the condominium governing documents.
Condo Board Has Fiduciary Duty to Condo Owners Regarding Assessments
The directors who sit on the Condo Board not only take on the additional duties of attending meetings, gathering information needed for an informed decision, and dealing with fellow Condo owners, they also set themselves up under Florida law to meet the highest standard of conduct: Condo Board owners act as “fiduciaries” to all unit owners.
This means that if a condo unit owner believes that the Condo Board has violated its duty in the assessing or application of a Special Assessment, for example, then that condo owner can sue the Board of Directors for “breach of fiduciary duty” — which brings with it the possibility of both actual and punitive (punishment) damages.
For example, in the 2001 case of Stevens v. Cricket Club Condominium, Inc., the Condo Board was found guilty of breaching its fiduciary duty to the condo owners because the Condo Board took special assessment monies that had been assessed to pay for fixing the swimming pool area and instead using some of that special assessment to fix a terrace area. It was found that the terrace area was not the same thing as the pool area and, therefore, it was a violation of fiduciary duty to use the pool assessment funds on the terrace.
The Cricket Club Condo Board Case – They Fixed the Terrace and Cleaned the Pool Area: Breach!
Several years ago, Gene Stevens and other condo owners of the Cricket Club Condominiums sued the Cricket Club Board of Directors for breach of fiduciary duty, seeking compensatory damages from the Board because the condo owners alleged that Condo Board of Directors spent special assessment money on things outside of those described in the Notice of Special Assessment that was sent to the condo unit owners.
The Cricket Club Condo special assessment was for $50,000 to be used to repair and resurface the swimming pool area. After the money was paid, the Condo Board did not resurface the pool area. Instead, they used a mere $2,005 to clean that spot and spent the rest to repair a terrace that leads to the pool area.
At trial, Stevens and the condo owners won – but the trial court only found nominal damages were shown ($1.00) so the condo owners appealed. The Cricket Club Condo Board cross-appealed. Result: condo unit owners did win on the legal argument but they didn’t get any more money out of the Board itself.
“[N]ominal damages can be awarded when a legal wrong has been proven, but the aggrieved party has suffered no damages … or where … recoverable damages were not proven.” Continuum Condo. Ass’n v. Continuum VI, Inc., 549 So.2d 1125, 1127 (Fla. 3d DCA 1989). When Stevens charged the Board of Directors with misapplying funds, the Board of Directors returned the 1992 special assessment funds to the unit owners and then specially assessed the funds necessary to repair the south terrace. Although Cricket Club did misapply funds, supporting a judgment for Stevens, Stevens failed to prove that he suffered any damages due to that misapplication, and thus an award of nominal damages was proper.
What Happens If There Is Money Left Over From a Special Assessment?
In order to meet its responsibility to all unit owners, the Condo Board is required to investigate how much things will cost and then base any special assessment accordingly. However, there are times when a special assessment brings in money that isn’t ultimately needed to cover the costs for the special project. What happens then?
Well, the Condo Board cannot just spend that money on another common area or Condo need, no matter how obvious or great that need might be. Excess funds from a Special Assessment must be either (1) refunded to the condo unit owners or (2) applied as a credit on the Condo Books for future assessment needs. (See Florida Statutes 718.116(10), 718.111(11)).
Therefore, as shown in the Cricket Club Condo case, even if the money is used for another common area fix, it is nevertheless a breach of fiduciary duty – the Condo Board must spend the money as it has been delineated to be spent in the Special Assessment Notice. Condo boards do get to make some of the rules, but fortunately they have to abide by them too.
A good piece of advice if you are dealing with a special assessment that you believe is unjust is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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