September 2005 Memorandum

It is not too late to learn the lessons that we were thinking about the Thursday morning before landfall. Double check those plans. Ensure that the community has adopted regulations to address emergency situations. Make certain that crucial documents including owner lists and secondary addresses are in order and in a safe, accessible location.

This is also a good time for Associations to review with owners and occupants their responsibilities to their communities. Owners should be attentive to their properties and areas around their properties. Remind owners of their responsibilities to obtain their own insurance as well as the likelihood of a special assessment to cover insurance deductibles and damages that insurance will not cover.

Last, but not least, reconsider how you will communicate with management and owners after a storm. Consider asking owners who are not in the area to delay contacting the Association so that management can expend limited resources on priority issues. It is always appropriate to remember that an ounce of prevention is worth a pound of cure!

ARBITRATION: COUNTRY CLUB CANNOT ARBITRATE A DISPUTE AFTER FIRING ITS GENERAL CONTRACTOR

What happens when a dispute arises during the construction of a building? The owner of the building might terminate the contract and refuse to pay the contractor. The contractor might sue for damages. If you think a firing owner can enforce an arbitration requirement, you may be wrong.

A Florida appellate court recently ruled that even though a construction contract contained an arbitration provision, a country club waived its right to seek arbitration of a dispute because the club terminated the contract before completion of the construction. In Aberdeen Golf & Country Club v. Bliss Construction, Inc., 30 Fla. L. Weekly D1734 (Fla. 4^th DCA, July 20, 2005), the Club entered into a $2 million contract with Bliss Construction to renovate a clubhouse. The contract contained an arbitration provision.

After work began, Bliss discovered mold in part of the clubhouse. Bliss notified the architect and claimed that the mold required additional work which should increase the price. The architect confirmed the presence of the mold and agreed that the mold caused delays which could affect the price. When the Club disagreed with Bliss and the architect, instead of proceeding with arbitration as provided by the contract, the Club terminated the contract with Bliss before completion of the clubhouse.

Bliss sued the Club for breach of contract, alleging that the Club’s premature termination of the construction contract caused damages. Only after suit was filed did the Club attempt to arbitrate the dispute. The trial court ruled that the Club waived its right to arbitrate by refusing to follow the contract’s dispute resolution provision.

The Florida appellate court agreed with the trial court’s decision refusing to compel arbitration. The court noted that the construction contract contained a provision requiring disputes to be initiated by notice to the architect within 21 days after the dispute has occurred.

The court pointed out that the Club, if the Club disagreed with the architect’s decision, was required under the contract to initiate mediation and arbitration. Instead, the Club decided to terminate the entire contract. “It rolled out the ultimate weapon-a refusal to pay draws then certified as due by the architect and declared a termination of the whole deal,” the court said. “Once the nuclear bomb was dropped, any resolution was not for this contract’s ADR meant to avoid total war.”

The court held that the Club could not claim the benefit of the arbitration provision after the Club failed to initiate arbitration after the discovery of the mold problem and it canceled the entire contract. Even if Bliss somehow caused the mold problem, the court seems to be saying that two wrongs do not make a right.

This decision emphasizes the importance for Associations to be aware of contract provisions particularly if the Association is about to become embroiled in a serious dispute. Associations should know what alternative resolution provisions are contained within its contracts and follow those provisions if it does become involved in a dispute. In this way, the Association may be found down the road not to have waived its rights.

CORPORATE RECORDS: UNIT OWNERS MAY HAVE THE RIGHT

TO INSPECT E-MAILS

The Florida Department of Business and Professional Regulation has said that condominium owners have the right to inspect general e-mail correspondence between the board of directors and the property manager if the correspondence relates to the operation of the association. Florida Statute Section 718.111 (12)(a)(15) provides that condominium associations shall maintain all records which are “related to the operation of the association.” Section 718.111(12)(c) provides that “the official records of the association are open to inspection by any association member or the authorized representative of such member at all reasonable times.”

On the other hand, the statute provides that unit owners do not have the right to access (1) any documents protected by the attorney-client or work-product privilege while litigation is pending; (2) information obtained by the association for approval of the transfer of a unit; and (3) unit owner medical records.

In its ruling, the Department relied on the arbitration decision, Aldrich v. Tahitian Gardens Condo. Assn., Inc., Case Nos. 96-0055; 96-0070 (August 5, 1996). Aldrich concluded that where records are related to duties that are vested in the association, such as maintenance and repair, the records constitute official records because they are “related to the operation of the association.” The Department explained that any records that are related to the management of the association constitute official records and are to be open for inspection by unit owners.

The Department also pointed out there are no regulations which provide how the e-mails are to be saved. The e-mails constituting official records must be maintained either on paper or electronically.

Although this ruling by the Department applies to Florida condominium associations, it would likely hold true for Florida homeowner associations. All Florida associations, upon proper request, should grant access to e-mails between the board of directors and property manager which are not excepted by statute from inspection. Other e-mails should be considered on a case-by-case basis.

FIRM NEWS

In observance of Labor Day, the firm’s offices will be closed Monday, September 5, 2005.

This information is provided for general information purposes only, may no be relied upon and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general comment of recent legal changes. This information is not legal advice, representation counsel or opinion. The changes in the law may not have been reviewed by Florida courts and may be subject to further challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are protected.