e af gNuee iogfhNbeoi gr h i osn s F l o r i d a FLleoar igdua eL o hbooordh oAosds Aoscsioacti iaot n SPRING 2012
The Many Journeys Of Dr. Ron Peterson
Visiting With Denmarkâ€™s North Sea Mariners
Attorney Michael Imber On Dispute Resolution
A MESSAGE FROM THE PRESIDENT
Welcome To The Spring Issue Of FLNA Magazine
Now is the time when most Neighborhood Associations have either held or are soon going to hold their annual membership meetings and elections. In this issue, Randall Roger provides some interesting insight into what is needed to properly conduct an election. After all, it is always better to “do it right the first time!” Whether you are a member of your Board of Directors, newly elected or staying on to either complete your term or start new one — or perhaps you’re just an interested member of your community — you should understand what Neighborhood Associations are all about. We all pay our assessments and have a vested interest in how our communities are run and what protections are afforded in the state statutes. In this issue: • We continue our coverage of the foreclosure/bankruptcy collection minefield with an article by Mitch Drimmer on collections. • Michael Imber discusses a less costly approach to resolving disputes: Alternative Dispute Resolution. • Regular columnists John Spillane and Riaz Singh discuss Accounting and Insurance issues. • We profile active community leader and educator Dr. Ron Peterson — a fascinating man to say the least. • Finally, Features Editor Tony Consalvi travels to Jutland on the North Sea coast of Denmark. As we were going to press, we received alerts from two organizations interested in the current legislative activity in Tallahassee. They have different viewpoints and concerns, and it would be worthwhile for all Association leaders and members to look into the current proposed legislation and draw their own conclusions. While FLNA does not endorse any political positions, we encourage everyone to review all the information and draw their own conclusions. Legislation is being considered as we speak. While there are more websites than the ones we list, you can start with: The Community Association Member Party (CAMP): www.camp2012.net Kathy Mears’ Page Regarding HB319: www.hb319.com The Community Association Leadership Lobby (CALL): www.callbp.com FLNA and FLNA Magazine are dedicated to creating the means for an open dialogue and a learning experience for all the Associations and Individuals who participate and encourage you to communicate with us and our fellow readers. Send Letters to the Editor at editor@FLNA.org or drop me a note at president @FLNA.org. Drop Tony a note on places you find interesting at TonyConsalvi @FLNA.org. You can also visit us on our website at www.FLNA.org and learn more about the activities and services we offer. You can also call us or write to us at the phone number and address listed on this page. Become part of FLNA and participate in our activities! Joseph Boyle, President Florida League of Neighborhood Associations
Spring 2012 FLNA Magazine is published by the Florida League of Neighborhood Associations Inc. Publisher & President Joseph Boyle Director, Member Relations J. Andrew Boyle Features Editor Tony Consalvi Photographer Jim Bongiovanni Contributors Chris Felker Jessica Gregoire FLNA Magazine 157 Monterey Way Royal Palm Beach, FL 33411 Phone: (561) 758-1618 Fax: (561) 258-0689 www.FLNA.org FLNA Magazine is published six times a year. Copyright 2012, all rights reserved by Florida League of Neighborhood Associations Inc. Contents may not be reproduced in any form without the written consent of the publisher. The publisher reserves the right to refuse advertising. The publisher accepts no responsibility for advertisement errors beyond the cost of the portion of the advertisement occupied by the error within the advertisement itself. The publisher accepts no responsibility for submitted materials. All submitted materials are subject to editing.
ON THE COVER It’s springtime in Florida, when local residents, such as the blue heron, are joined by visitors from all over the world. PHOTO BY JIM BONGIOVANNI
Spring 2012 • FLNA Magazine • Page 3
THE HOA ATTORNEY BY RANDALL K. ROGER, ESQ.
Preparation Suggestions For An Association’s Annual Meeting
The end of the holiday season normally signals an upswing in Association activity. While most of us are returning decorations to their boxes, Boards of Directors are making plans for the coming year. If the Association has not done so already, its most important event — the Annual Meeting and Election of Officers — is most likely on the immediate horizon. For a Homeowners Association, the manner in which the meeting is run is governed pursuant to the requirements found within the Association’s governing documents and Chapter 720, Florida Statutes. Accordingly, we offer general guidance and direction as to issues, concerns and preparation suggestions for addressing Homeowners Associations’ Annual Meetings. First, it is essential that the Association identify the time and date called for the Annual Meeting. Customarily, such date will be referenced within the Association’s Bylaws. If the date is not referenced within the Association’s governing documents, the Board has some degree of discretion in selecting the date for the meeting. Such discretion should take into account the date of the previous Annual Meeting, the date when the Association customarily holds its meetings and the necessity to have a meeting within a calendar year succeeding the last Annual Meeting. Second, the Bylaws dictate the extent of the notice required for the meeting. If the Bylaws are silent, reference to Chapter 720.306(5), F.S., requires notice not less than 14 days in advance of the meeting. The means and manner of a notice is likely addressed in the Association’s Bylaws. The person providing the notice should execute an affidavit evidencing the giving of such notice, which affidavit should be filed
in the Association’s official records. Notice should be sent to the members as identified in the governing documents. Members are, generally, the record title holder of the residence. The notice should be sent to the addresses that the members have filed with the Board of Directors. The Board should be aware of changes in address, as well as new owners, to ensure that the notice is sent to the proper location. In addition, the Association should review the governing documents to determine whether there is a cutoff date for new owners. Some governing documents provide language indicating that the member roster should be as it exists a certain number of days prior to the Annual Meeting, so as to avoid the inconvenience and problem to the Board in tracking changes in ownership and/or address just prior to the date of the Annual Meeting. Third, the election process, customarily taking place at the Annual Meeting, is further governed by the Association’s governing documents. Careful attention to the language of the governing documents is essential to ensure conformity with the Association’s requirements. Communities differ in the manner in which elections are conducted. Some communities permit a vote by secret ballot, and such process is now recognized under Chapter 720.306(8)(b), F.S, in limited instances. Many Associations permit voting by proxy. Determination, however, as to whether a general and/or limited proxy is acceptable for voting must be determined prior to the meeting, to avoid confusion. Finally, in limited instances, governing documents may provide for a vote exclusively in person, prohibiting the use of proxies for an election. Please note, however, that even in such instances a proxy may still
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be valid for the purpose of establishing a quorum. At the Annual Meeting, the first order of business is to confirm proper notice, followed by determining the existence of a quorum. Section 720.306(1), F.S., provides a quorum shall be 30 percent of the members unless a lower number is provided in the Bylaws. Consequently, review of the Association’s Bylaws is essential to determine the number of members who have to appear either in person or by proxy to establish a quorum. If a quorum is not established, the meeting cannot convene, and an election of Directors may not be held. Presuming the Association has secured a quorum, the meeting may be called to order and should be conducted in accordance with the agenda, customarily found within the Association’s Bylaws. If there is no set agenda, then it is recommended that the Association operate pursuant to Robert’s Rules of Order. At such time as the election is to be conducted, Florida law requires that, in addition to any potential nominations made in advance of the meeting, nominations be permitted to be taken from the floor. The Board should carefully review the candidates to determine that they are qualified to serve on the Board. A review of the governing documents, in advance, shall identify basis for disqualification of candidates, if any. Section 720.306 (9)(b), F.S., provides that any person who is delinquent in the payments of any fee, fine or other monetary obligation to Association for more than 90 days is not eligible for the Board membership. Additionally, any person who has been convicted of any felony is not eligible for Board membership unless such felon’s civil rights have been restored for
at least five years as to the date on which such person seeks election to the Board. Once the nominations have been completed, a motion should be presented to the members to close the floor to nominations, seconded and the floor closed. Thereafter, no additional nominations should be accepted. At such point in time, the members should vote for the candidates of their choosing. Once all votes have been cast, it is recommended that a committee composed of individuals with no connection to the candidates tabulate the votes. These individuals, it is recommended, be neither spouses nor family members of the candidates. Further, while obvious, such individuals should have basic mathematical skills in order to successfully tabulate the votes. The election results, prior to announcement, should be checked and rechecked. In the instance where there is a particularly close election, it is rec-
ommended that all ballots be recounted to ensure a valid election tabulation. All of the election committee members should sign off on the final tally confirming their representation that the results are correct. Upon completion of the tally and confirmation of the results by the election committee, the results should be announced to the membership and any additional business remaining addressed. Thereafter, after the meeting has been adjourned, the election materials should be properly bundled and safeguarded to ensure that, should a recount be requested and conducted, the election materials have, at all times, been maintained under appropriate and secure conditions. Moreover, the parties conducting the recount, if any, should be observed during such process so as to ensure that no tampering with the election materials may occur, the effect of which would be to throw into contention the results originally
announced at the Annual Meeting. With proper preparation, anticipation of problems and accommodation for same, the Annual Meeting should be a successful event, allowing the membership to address issues before the community and adhere to the democratic process of selecting its governing Directors. We wish you all the best of luck. Randall K. Roger Esq. is an attorney with Randall K. Roger & Associates, P.A. The information offered in this column is presented for general information purposes only. The information presented here does not constitute, nor is it intended to be, legal advice. The transmission of the information is not intended to create, and receipt of the information does not constitute, an attorney-client relationship of any kind or nature. Readers should not act upon or rely upon any information presented here without seeking the advice of a licensed attorney.
Spring 2012 â€˘ FLNA Magazine â€˘ Page 5
DISPUTE RESOLUTION BY MICHAEL H. IMBER, ESQ.
Part Of An Association Dispute? Consider The Benefits Of ADR
There are all sorts of disputes that may arise among the different groups who are involved in a Neighborhood Association, whether they be the association’s Board of Directors (often represented by their property manager) or the unit owners. Sometimes, disputes between neighbors also fall into this mix. Examples of disputes range from collection and enforcement issues, elections or the lack thereof, or selective enforcement of the documents (covenants) to procedural issues. These problems have a potentially devastating effect on the peace of mind of all concerned, whether they be the members of the Board (normally wellmeaning unpaid volunteers with minimal experience in the complexities of association law) or the unit owners who also lack the experience to legally protect their interests in a community in which they have vested their lives and families. Looming over it all are the costs, both to the Association membership as a whole as well as the individual unit owners involved, that will be incurred to resolve such disputes. Left unaddressed, these disputes could spiral out of control and ultimately become a legal matter, and, once a matter becomes legal, one thing is assured — costs will skyrocket. Attorneys’ fees and court costs continue to rise. According to an article published in the Daily Business Review on Dec. 27, 2011, the average hourly rate for law firm billable hours in 2011 was $407. Is there another alternative? Abraham Lincoln said: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses and waste of time.” Alternative Dispute Resolution
(ADR) is the term used for a broad spectrum of approaches to disputes that have been embraced by the courts, large and small businesses, and private individuals as a means to resolve disputes in a fair and cost-effective manner. At one end of this spectrum is mediation, probably the least expensive and yet the most flexible alternative. Mediation is generally done on a voluntary basis but in certain instances may be required. The mediator acts as a neutral party and has no power to make a decision about the dispute. The mediator, using his or her skills, helps the parties understand the strengths and weaknesses of their case. The proceedings are confidential, so, if no resolution is reached, any matters discussed in an attempt to resolve the dispute may not be discussed outside of the mediation room. If the parties are able to resolve their differences, the mediator may assist in helping the parties draft the agreed terms into a binding document (stipulation) for them to sign. With the proper language, this stipulation may be enforceable in a court of law, should one party fail to live up to the terms of the settlement. At the other end is arbitration, where the arbitrator listens to both sides of the dispute and then makes a decision or compromise. In non-binding arbitration, all parties have the option of accepting or rejecting the arbitrator’s decision. If binding arbitration is chosen, the arbitrator will stand in the place of a judge and make the final decision. Our courts have overwhelmingly embraced the ADR concept. In fact, most judges will order the parties to me-
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diate their case before even setting a trial date. So, even if one or more of the parties chooses to file a lawsuit without first giving mediation a chance, there is a strong likelihood they’ll end up at a mediation anyway. Homeowners and condominium matters are governed by Florida Statutes. Section 720.311 of the Homeowners Statute encourages mediation of disputes. Section 718.1255 of the Condominium Statute is even stronger, actually mandating ADRs in certain circumstances. Mediators and arbitrators vary widely in terms of their education, training, areas of expertise, licenses and certifications. Just like engaging the services of any other professional, parties would be well advised to learn about the qualifications of their mediator or arbitrator before engaging him or her. Neighborhood Association Boards of Directors, whether or not they employ a property management company, may want to consider the implementation of a proactive ADR program to address, at the least, violation and collection issues. Structured correctly, this can become a very powerful tool to reduce time and expenses and enable the boards and managers to better focus their energies for the good of their neighborhood. Michael H. Imber, Esq., has been practicing law in Florida for 21 years and has been rated AV preeminent by MartindaleHubbell, the highest rating for trial lawyers. He is a Florida Supreme Court Certified Mediator for County Court and Circuit-Civil Matters. Call him at (561) 8181055 with any questions about mediation.
Spring 2012 • FLNA Magazine • Page 7
Author, Doctor, Teacher & Traveler: Dr. Ron Peterson’s Many Journeys BY JESSICA GREGOIRE
Sitting at his desk in his office at South University, Dr. Ron Peterson reminisces on a life filled with unique experiences. Peterson has most certainly led an exciting life, from his childhood growing up on the small Caribbean island of Trinidad to his recent appointment as director of the physical therapy assisting program at South University. As a published author of two books, Baa Baa Black Sheep and Journeys of My Life, he has written stories about his life experiences, from his travels in the British Royal Army to living in Northern Ireland. Peterson’s journey began when he left his homeland for the international city of London. “As Trinidad is a former British colony, after high school, I went off to London to pursue my studies,” Peterson said. “While there, I was attracted by the military and joined the British army.” Peterson joined the Royal Army Medical Corps as a dispenser. During Peterson’s time in the army, he spent time in Germany, Malaysia and Singapore, but he was not satisfied as a dispenser and wanted a more handson profession. “So I went back to school in London and trained as a physiotherapist,” Peterson recalled. “After graduation, I had to give the army back some service, so I went to Belfast, Northern Ireland.” After his service, Peterson obtained his teaching degree from Ewell Technical College in Surrey, England. Armed with his degree and extensive training from a top English physical therapist, he moved to Jamaica, where he became the head of the physical therapy training program at the University of the West Indies. “Back in
1975, I graduated the first physical therapy training program in the Caribbean,” he said. After years of teaching in Jamaica, Peterson returned to his native Trinidad and opened a private practice, but he didn’t stay put for long. “The minister of health for Trinidad asked me if I could go to Tobago to start the firstever physical therapy service for the island,” he said. Peterson spent eight years in Tobago, where he met his wife of 30 years, Carmen, and started his family. But the need for new experiences called once again. “The lure of professional life got me up and running, so I put my résumé out there,” he said. “The next thing you know, I’m in Louisiana.” Peterson became the head of rehabilitation services at Slidell Memorial Hospital in Slidell, La. “That was a tremendous position because I was in charge of eight different departments,” he explained. For Peterson, the job was a dream come true, but life in Louisiana left a bit to be desired. “It didn’t have the beaches and casual lifestyle that appealed to us,” he said. “My wife wanted us to move to Florida, so we did.” Peterson and his family left Louisiana for sunny South Florida, where he became the director of rehabilitation at the Royal Manor nursing home and skilled nursing facility in Royal Palm Beach. “I spent three years there before opening my own private practice,” he said. Peterson is now owner of Peterson Rehabilitation, at 5912 Okeechobee Blvd. in West Palm Beach across from Century Village, and has become a well-respected expert in the field of physical therapy. “I’ve had close to 40
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years of experience in physical therapy,” he said. “I realized that I had so much to offer in terms of experience, knowledge and teaching.” To share his knowledge with others, he decided to apply for a teaching job. Luckily, in January 2011, Peterson received his opportunity to teach, as the new program director for the physical therapy assisting program at South University. “The university opened its new campus in Royal Palm Beach, and as fate would have it, there was a vacancy for program director,” he said. “So I applied for the position and was accepted.” South University is a multi-campus university with nine campuses across the nation and classes online. The university offers master’s, bachelor’s and associate’s degree programs in fields from physical therapy to information technology. Peterson is excited to be working at South University and is confident about its future. “We have just gone through our 10-year accreditation visit, and I feel very optimistic that we will have no problems in reaccreditation,” he said. “We offer a very high quality of physical therapy teaching.” Peterson wants to bring the school’s physical therapy program to the next level of excellence and is looking forward to helping students succeed in their careers. “The program has been ongoing now for over 10 years, and I have just taken over the reins, and I’m hopefully leading it in a good direction,” he said. Peterson said his top goal is to bring out the best in South University’s students. “I think that I inspire them and demand very high standards, and they are excited by the challenge,” he said.
A lifetime of travels around the world under his belt, Dr. Ron Peterson is now director of the physical therapy assisting program at South University. PHOTO BY JESSICA GREGOIRE
Spring 2012 • FLNA Magazine • Page 9
FLNA PROFILE “Since I have come on board, I have revised our admissions standards so that
only the top students can get into this very intense program where in 15 months
Dr. Ron Peterson with one of the skeletal models he uses with his students.
Page 10 • FLNA Magazine • Spring 2012
they graduate with a degree in physical therapy assisting.” Peterson enjoys teaching, and he believes his students can sense his passion for the field of physical therapy. “I don’t just stand there and lecture; I try to capture the students’ attention by keeping them engaged,” he said. “Nowadays, teaching is no longer talking at students, it’s more of an interactive process.” Students themselves are able to identify areas where they need further instruction and concentration. The instructor then assists them in developing and understanding those particular areas. “I look at myself not as a teacher but as a facilitator of stu-
dent education,” Peterson said. “It’s a long way from teaching physical therapy in the Caribbean. In those days I taught it, and now I facilitate it.” Peterson has been teaching since 1974 and has seen many dramatic changes in the area of education. “The whole process of education has shifted almost 180 degrees,” he said. “I’ve had a long history of education, and this is why I wanted to be teaching full-time.” Although Peterson has been on a long, eventful journey throughout his life, he ultimately enjoys the little things that make living worthwhile. He spends free time writing books, gardening and playing music.
Spring 2012 • FLNA Magazine • Page 11
If You Don’t Ask, You’ll Never Get! WHY AND HOW TO PURSUE ASSOCIATION WRITE-OFFS
By Mitch Drimmer, CAM So there you are at another board meeting, and your community association manager is sharing some good news and some bad news. The good news is that after three years, the bank has finally foreclosed and taken title to Unit 101, and since the mortgage was $150,000, the association has recovered $1,500 in assessments (the lesser of 12 months’ maintenance or 1 percent of the total due, frequently referred to as the statutory cap). The bad news is that the unit owed $10,400, including $1,500 in attorney fees. After paying the attorney, the total net recovery for the association was zero, and the shortfall to the association was $8,900. The treasurer asks, “What now?” and the manager responds with, “Our lawyer says that we have to take a write-off.” Is this really the end of this receivable? Few ask why there is a write-off, and if they do, they are quickly told that the money is lost forever and becomes another budget entry for the bad debt line item. Time is short, and the meeting agenda must continue onward to other pressing matters. Hold on a minute … put on the brakes … let’s go over what just happened. The board needs to take a careful look at this “write-off” and not be hasty about letting it all go. This remains an opportunity to recover more money for the association. Did anyone
ask why the former owner of Unit 101 gets a free pass and can walk away from the association without paying what he or she owes? Did that owner’s foreclosure extinguish the debt owed to the association by the individual(s)? In most cases, the answer is a very definite no. Does the association want to recover any of the $8,900 that it was instructed to write off? Does it need or want that money? Of course it does. Can an association get back any of the money it is owed after a bank forecloses and sails into the “safe harbor” of the statutory cap? The answer is yes, but only if the association knows it can and then makes the effort to collect it. It is money being left on the floor. All the association has to do is reach to pick it up. This real-estate meltdown has so confounded everyone in the community association industry that opportunities are being missed and money squandered. We have lost our business compass and are drifting listlessly in a sea of misinformation and confusion. The fact of the matter is that it does not have to be that way. So let’s start with the problem and see what can be done. In 1833, the federal government abolished imprisonment for unpaid debts. That does not mean, however, that people are allowed to walk away from what they owe. Even Florida,
which has been labeled a “debtor’s state,” allows businesses and individuals to pursue and collect debts through legally compliant procedures. So why has the community association industry been slow to realize that there is money being left on the floor? Because what we are facing is a new dynamic and there are lots of issues that nobody has even considered. Associations are ultimately run by volunteer boards of directors who direct community association managers to keep the community running smoothly. Bookkeeping is just one of a manager’s countless responsibilities, but they are by no means collections experts. The board also depends on its association attorney to advise about legal issues concerning the community. Most of these attorneys are not by training or vocation specialists in the art and science of collections. Law, like medicine, is a specialized field, and community association attorneys have enough on their plates without having to pursue collections of write-offs. What boards need to know is that when a bank forecloses, takes title and leaves the association with an unpaid debt, the money is still owed to the association and may be attempted to be recovered. The recovery is not always easy. It may not always be fruitful. My father always told me, however, that “if you don’t ask, you will nev-
‘What boards need to know is that when a bank forecloses, takes title and leaves the association with an unpaid debt, the money is still owed to the association and may be attempted to be recovered. The recovery is not always easy. It may not always be fruitful. However, if you don’t ask, you’ll never get.’ Page 12 • FLNA Magazine • Spring 2012
er get.” Boards of directors need to ask this simple question: “Is there any way that we can go after the former owner and get back the money that is owed to us?” My advice to association boards is to take nothing for granted and treat this lost money as if it were a debt personally owed to you. Would you walk away from it? Instead of getting angry, do something to recover your money. So now that we know that this money can be recovered, how do we go about reclaiming it? Community associations have many avenues at their disposal for the recovery of this money. For amounts less than $5,000, one option is small claims court. The process may cost some money and require association time. Engaging a collection agency is second option. Most collection agencies operate as agents of creditors (like an association) and collect debts for a percentage of the total amount owed.
So if you are collecting zero, any percentage recovered looks pretty good at this point. Businesses in the United States placed more than $150 billion worth of debt with collection agencies in 2010 and recovered $40 billion of that debt. There are in excess of 4,100 debt collection companies working to recover debts for businesses and individuals in the United States today. It’s a big industry, and there should be no reason your association has not explored hiring one. Consider this: Debt collection agencies employ more than 400,000 people in the United States. In Florida, there are debt collection agencies that have focused on the community association industry and are actively working to collect community association debt owed on exclusively
a contingency basis. If you are a member of a board of directors, it’s time that you considered what is owed and how you can get it back. I’m sure that there is a debt collection agency that would be glad to speak at your next board meeting. And if the board gives them the green light, they will be happy to contact that former owner of Unit 101 and pursue recovery of the association’s money. If you don’t ask, you won’t get. Mitch Drimmer is a licensed community association manager and is vice president of Association Financial Services, a specialty finance, business process outsourcing and accredited collection agency specializing in community associations. For more information, visit www.association financial.com.
Spring 2012 • FLNA Magazine • Page 13
The Foreclosure Crisis: Is There An End In Sight?
By Leonard F. Baer We heard the news, read the stories, but never believed it could happen to us or our neighbors. Now a question arises: Could home foreclosures destroy a way of life? Since the “Great Recession” began in 2008, Florida in particular has experienced a steady hemorrhage of jobs. The magnitude of job loss has resulted in an even greater number of filings of home foreclosures and begs the question, when will it end? Lawmakers in Florida and elsewhere in the country are asking themselves the same question. Many factors played into the current crisis, including a combination of the Federal Reserve Board keeping interest rates far too low, the failure of elected officials to recognize the problem and consumers’ lack of fiscal responsibility. Lenders’ tactics were questionable as they initially enticed consumers with all-time-low interest rates and then stood by unable to help when interest rates increased. Also, when a homeowner had no job or ability to pay, or the house was “underwater,” the lenders’ hands were tied by regulators not allowing modifications or refinancing. Overuse of credit to help pay for basic expenses became a major contributor to this issue. There are many explanations for substantial unsecured debt, such as unemployment and healthcare costs. Upon reviewing the consumer bankruptcy filings, it became evident the unsecured debt came
at a monthly cost so high, it threatened the consumer’s ability to pay their most important bill each month, their mortgage. Difficulty meeting monthly expenses outside the most basic requirements, stressed an already overburdened household, which then set the stage for failure. In many instances, when payments were missed, foreclosure was the result. The blame for the crisis cannot be placed squarely on one institution or person alone, but rather, a more collective view must be considered if we are to learn anything. What continues to be revealed by the unwinding of the bank crisis, corporate malfeasance, unemployment and consumer bankruptcies is the ever-present excess and greed of various individuals and their institutions. The crash was inevitable, leaving some no choice but to file personal bankruptcy in an effort to try to avoid foreclosure. The problem is that often bankruptcy did not prevent foreclosure but merely stalled the process. In some cases, any saved resources such as 401(k) plans or other retirement investments were tapped or depleted by consumers in an effort to hold on to a house, already underwater. The Florida court system is feeling the impact in unprecedented ways, as pending foreclosure cases currently number at
least 368,000. Although a foreclosure action can take as long as 180 days or longer to finalize, media reports continue to blast consumers across the Internet, and print media assert that “help for distressed homeowners is on its way from Washington,” and yet, unfortunately, many families are simply beyond the point of no return. Many families with school-age children are now homeless due to unemployment and foreclosures. Those parents will tell you it was not the life they planned, or the hardships they wanted their children to endure. Perhaps the lessons and observations learned by these children will produce the “Next Great Generation.” We can only hope children growing up in the aftermath of this financial crisis will no doubt be more resourceful and perhaps understand the value of money better than their parents. Will this crisis end? Yes, of course, but will we learn from our mistakes? Be Educated! Be Proactive! Attorney Leonard Baer is licensed in the states of Florida, North Carolina, Georgia and New York, and in the District of Columbia. He has been selected for inclusion in the Bar Register of Preeminent Lawyers and is a Certified Court Mediator. His offices are in Wellington, Florida, and in Highlands, North Carolina. Visit him on the web at www.legalbaer.com.
‘The blame for the crisis cannot be placed squarely on one institution or person alone, but rather, a more collective view must be considered if we are to learn anything. What continues to be revealed by the unwinding of the bank crisis, corporate malfeasance, unemployment and consumer bankruptcies is the ever-present excess and greed of various individuals and their institutions.’ Page 14 • FLNA Magazine • Spring 2012
INSURING YOUR ASSOCIATION BY RIAZ SINGH
What Other Coverage Do We Need? Question: What insurance do I need to buy as an individual unit owner to round out the condo or homeowners’ association’s coverage? Answer: First and foremost while we are all confident in our HOAs’ directors to obtain proper insurance coverage, you must take adequate steps to protect your own property. HOA policies will generally cover “common ground” issues. Any claim arising from anything other than common ground will be your responsibility in the insurance carrier’s eyes. Condo insurance that bridges the gap in coverage between your condo association’s master insurance policy and your property/personal liability protection is known as a H06 condo insurance policy. Every condominium development has a master insurance policy that covers items such as the actual building in which you reside and all
of the common area elements. However, these policies typically stop at the four exterior walls of your condo. This means that not only are your personal contents not insured by that policy, neither are any of the items within the four walls of your condo. An H06 policy will cover your contents. Also, it is very important that your H06 policy cover your complete liability based upon what your condo association bylaws and rules state. There are several types of home insurance policies, which have different levels of coverage. The most popular is known as an HO3 policy. This type of coverage is provided for one- or two-family units. The property must be owneroccupied. HO3 insurance generally protects against
direct losses due to the following: explosions, fire, hail, lighting, theft, tornadoes, vandalism and wind storms. Flood is not covered and has to be purchased separately. Comprehensive personal liability is also covered, should someone injure themselves on your property. This type of policy will do well to round out the coverages under your HOA. Riaz Singh is with Tradewinds Insurance Consultants LLC. For information on association protection, call (561) 5785758 or visit www.florida tradewinds.com. Answers provided in this article are for informational purposes only. You should always contact a licensed insurance agent or surplus line professional for advice.
THE ASSOCIATION ACCOUNTANT BY JOHN SPILLANE
How Associations Are Taxed
Question: Since most HOAs are non-profit entities, do they have to file corporation tax returns? Are we taxed on any surplus funds we have leftover at the end of each year? Answer: HOAs can elect to be taxed under IRC Section 528 and file U.S. Form 1120-H, U.S. Income Tax Return for Homeowners Associations. Some Associations elect to file as regular corporations and file U.S. Form 1120, U.S. Corporation Income Tax Return. In this case, a Florida corporation must file a Florida Corporation Income Tax as well as the federal return. In the latter case, there are some tax advantages to filing a regular corporate tax return, such as the ability to carry back or forward any losses that occur as a corporation. Most Associations each year choose to elect the method that yields the lowest tax.
However, the decision whether to file Form 1120 or 1120-H is very complex, and requires a full understanding of the tax treatments of the components of the Association’s income and expenses. If an Association elects to file under IRC Section 528 on Form 1120-H, it must allocate its income and expenses between “exempt function activities” and “non-exempt function activities.” An Association is not taxed at all on its “exempt function activities,” but taxed at a flat 30 percent on all of its “nonexempt function activities.” An example of exempt income would be member operating assessments, whereas interest and investment income are considered non-exempt. It should also be noted
that if an Association provides for replacement reserves each month, shown as expenses on the financial statements, these expenses are not deductible as such on the federal tax return. They are only deductible when paid. Also, it is not true that an Association is taxed only on any surplus funds it has on hand at the end of each year. Hopefully, this brief explanation will help you better understand just how complex the tax laws are in dealing with Associations. J.P. Spillane is a certified public accountant with many years of experience in working with HOAs. He lives in the western communities, and his office is in Wellington. For more information, call (561) 790-1488 or visit www.jpspillanecpa.com.
Spring 2012 • FLNA Magazine • Page 15
The seaside town of Hvide Sande.
NOT ON THE GRAND TOUR
Jutland’s North Sea Mariners... Hospitality In An Inhospitable Place By Tony Consalvi Denmark’s Jutland peninsula is really the northernmost part of mainland Europe, while the rest of the country is a collection of islands separating the North Sea and the Baltic Sea and leading to the southernmost point of the Scandinavian peninsula in Sweden, all connected by ferries and some very extraordinary bridges. The passage west across the Storebaelt, the inland sea separating Zealand, the island on which Copenhagen is located, from the next largest island, Funen, is 13 kilometers long, beginning with an extraordinarily beautiful suspension bridge whose far end is anchored to an island situated in the middle of the water and followed by an equally astounding causeway which carries both motor vehicles and train traffic the rest of the distance. We crossed Funen, went over another suspension bridge and entered the rolling hills and farmland of Jutland, with its small churches and yellow fields of mustard plants. Leaving the main highway, we drove casually along back country roads through picturesque small villages before turning
north along the coast, where we were soon greeted with a wondrous expanse of windswept dunes. At the north end of the Ringkobing Fjord is the town of Ringkobing, whose inhabitants have always lived by the sea and made their living from fishing and salvage. They are probably descendants of the Vikings, the Norsemen who plied the sea more than a thousand years ago and ventured as far south as North Africa, east into what is now Russia, and west possibly even to North America. Many of the people, however, tell a different story — how sailors from other parts of Europe who had been shipwrecked during the winter storms off the nearby coast were saved by the local townspeople and put up in the local farmhouses, where they huddled together with the locals to ward off the cold North Sea winds. These sailors made “friends” with many a local girl, and today, many families claim ancestry from many nations. Look around, they tell you. Not everyone’s hair is blond. Many have dark eyes, not blue, and many are not very tall. How else can such a phenomenon be explained?
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Their real story is one of a constant war with the North Sea, which relentlessly pounds the coastline. While the Dutch protected themselves by building dikes to keep the sea out, these hardy Danes faced a different challenge. For many years their harbor was protected by the dunes, with an outlet at the south end of the fjord where a great lighthouse stood to guide the fishing boats to safe passage. About 200 years ago, the sea began to push the sand up along the length of the fjord, creating more and more dunes, finally closing off the fjord and Ringkobing from the sea. Without such an outlet, Ringkobing, at one time the most important fishing village on Jutland’s west coast, fell rapidly into decline. In the years before World War II, the local mayor, a man of great vision and an even greater sense of duty and purpose, persuaded the government to reopen the fjord by building a canal near what is now Hvide Sande, a small village situated on the dunes. It took many years and a great engineering effort to complete. More than once, the winter storms pounded the construction site and flooded the town, but the mayor
rallied the people and they persevered. Soon Hvide Sande and Ringkobing again took their places in the fishing industry of Denmark. The old lighthouse now sits a few kilometers from the new inlet but is still in use to warn the sailors on the treacherous North Sea, while another watchtower looks over the canal. In the winter of 1951, a Dutch ship, being pounded about as many ships are in those unforgiving waters, called for help, and the local people of Hvide Sande sent their brand new rescue boat to their aid, but a mighty wave washed most of the rescuers overboard to their death. Even the king came to Hvide Sande to honor those brave but ill-fated mariners, who were laid to rest in the local churchyard where theirs are the only graves that are guaranteed perpetual care. One of the names engraved on the memorial marker is that of Aage Iverson, the mayor’s son. The relentless sea never forgets, nor forgives. One narrow road snakes its way through the dunes from Nymindegab on the southern end of the fjord to the turnoff at the north end to Ringkobing. On one side, lolling peacefully, small waves driven by the wind gently touching the shore, its level protected by the sluice at Hvide Sande, is the fjord. On the other side, across the barren, high grass holding the sandy soil intact and running along as far as the eye can see, are the towering dunes that protect this artificial tranquility from the fearsome power of the North Sea. Only at Hvide Sande, where the canal cuts through and the harbor has been cleared, can you see the proximity of the two bodies of water and the balance created by the natural protection of the dunes. Along the dunes, the trees, unprotected from the fury of the wind, have grown sideways, leaning futilely toward the protection of the fjord, while the houses show their respect for the sea, or maybe you might think their defiance, by turning their backs, allowing the wind and sand to
(Above) Dunes rise along the shore of the North Sea. (Below) Seafarers Church with Aage’s Memorial Cross at the right.
blow over their roofs as they open up and look the other way through their big picture windows and over their large outdoor decks toward the fjord’s calmness and beauty. Even in midspring, the hardy locals bundle up in winter coats when they ride their bicycles along the road to town. The orderly balance seems in place, but there is always the threat of the sea on the other side of the dunes. We had come to Hvide Sande to celebrate a friend’s birthday party, and on that special day we watched from the warmth of her house and through the picture window as the family parked their cars in the churchyard on the other side of the road, crossed over and traversed a small path in the dunes to the house. We were a bit apprehensive, all these people coming to congratulate our friend while we, visitors who did not speak the language and who
had met only one of them in the past 30 years, were obvious outsiders. It took only moments to allay our fears. An interesting custom, one rarely seen anymore in our country, took place. Every person who entered the house except, of course, the infants, from the youngest child to the most senior adult, made it a point to walk over and introduce himself or herself, and, most significantly, shake our hands. While the action was informal, we were witnessing a custom of hospitality and respect that immediately made us feel part of the group. After the meal, we all boarded a bus and visited Abeline’s Gaard, a local farmhouse which was located in the dunes just south of Hvide Sande and had been turned into a museum. The farmhouse, typical for the area, was actually a self-sustaining compound built in a square to ward off the wind,
Spring 2012 • FLNA Magazine • Page 17
FLNA FEATURE with the sides facing the dunes used for workshops and stables and those on the lee side the living areas. Abeline, who had died less than 20 years before, had lost her husband early in life and spent more than 50 years raising her family and managing the farm. She
had been very practical. When the first telephone lines were being installed, the telephone company had asked her to install a telephone in her farmhouse to serve as a central telephone for the area rather than their trying to run lines to each house. She had steadfastly re-
The calmness of the Fjord.
Page 18 â€˘ FLNA Magazine â€˘ Spring 2012
fused the request, citing not only her inconvenience but also her privacy. One day, the telephone company told her they would pay her for her trouble. She insisted they install the telephone that same day. On our last morning, we visited one of the family members who lived in a houseboat on the fjord. We had just sat down when the door opened and some of those whom we had met the day before came in. They had known we were visiting and had come over to say goodbye. Now understanding the local custom, we also made sure that we greeted each person and shook each otherâ€™s hand. As everyone sat around the table drinking hot coffee or tea and nibbling on some local pastry, we felt we were with friends and exchanged addresses, phone numbers and, in our modern age, e-mail addresses, before finally taking our leave to drive the 200 km or so back to Copenhagen airport and our flight home.
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