Sunday, October 9, 2016

Renting or Buying 2016

       The dream of home ownership is as American as hot dogs, baseball and apple pie.  At least that was the theory until the great recession that ruined home ownership for millions.  With the economy mostly recovered, mortgage interest rates at all-time lows and rents rising, is it now better, once again, to own or rent.

          Homeownership levels continue to fall with the level of ownership hitting a 50-year low last quarter.  Currently only 62.9% of households are owner-occupied.  Ownership levels are highest for seniors, and at an all-time low for millennials at 34.1%. The decline is due to several factors

          On strictly financial basis, using a five-year period of ownership and making some basic assumptions (your mileage may vary), renting versus owning is nearly a wash, with homeownership slightly less expensive:

                                                            Renting                            Owning
Monthly Payment                                $1,350.00                        $   954.83         
Taxes/Insurance                                           20.00                             400.00
HOA Assessments                                        0.00                              100.00
Maintenance                                                 0.00                              250.00

Monthly Costs                                     $1,345.00                        $ 1,704.83

Down Payment                                                                            $50,000.00

Five Year Cost                                      $80,700.00                    $152,289.80

Less Interest on Down Payment (2%)   ($5,204.40)                    

Less Increase in Value (3%)                                                        $(39,818.00)

Less Principal Reduction/Equity                                                 $(69,105.00)

Interest Expense/Deduction                      $520.40                      $(7,636.80)

Plus Costs of Purchase/Sale                                                         $28,185.00

          Total Cost                                  $75,495.60                       $63,915.00

          This chart is based on a $250,000 home, a $50,000 down payment, an association payment of $1,200 a year, rent averaging $1,350 a month over five years, maintenance costs of $3,000 per year, a sales price of $278,750 after five years, plus the renter investing the $50,000 at an average of 2% and the homeowner’s home value increasing at a rate of 3% per year.  Given these factors, the savings over five years is approximately $12,000.  This includes costs of purchase of $5,000 and costs of sale (including a real estate commission of $23,185). 
          Longevity: Determining whether to rent or own is dependent on several important factors.  First, how long do you plan to stay in your next home has to be determined, because one of the best benefits of home ownership is tied to longevity of ownership.  Our sample favors renting through year three, with each year thereafter supporting buying.

          One key factor tied to longevity is how mortgage loans are front loaded with mostly interest.  Fixed Rate Mortgages are amortized to provide a fixed monthly payment over the life of the loan.  Initially the payments are mostly interest, with only a small amount going to principal.  A typical $250,000 house with a $200,000 loan will only have principal reduced by $19,000 if sold within the first five years.  It takes nearly 20 years to reach a 50% reduction in the loan balance.

          Tax Deduction:  One benefit of homeownership is the ability to deduct mortgage interest paid on loans to acquire and improve the home. This can be worth thousands in tax savings during the early years of a mortgage.  However, many people do not have enough deductions to make itemizing their taxes worthwhile, and this benefit is lost if the homeowner cannot itemize their taxes.

          Maintenance:  One drawback of homeownership is the requirement of maintenance of the home from lawns, to painting, to repairs and replacements.  Renters mostly rely on the landlord to handle maintenance, repair and replacement costs.  Homeowners have to bear the full cost, which can be very expensive.  A new a/c system costs over $2,000, and a new roof can run from $7,500 to $30,000 depending on whether its shingle, cement or barrel tile roof system. 

          Down Payment:  The down payment is the largest bar to home ownership, especially for younger and first time buyers.  Typically, the down payment is twenty percent of the purchase price.  This is a large sum that may be difficult for many to accrue, and even the three percent down payment on an FHA loan may still act as a bar when coupled with closing costs that easily exceed $5,000.  Renters only usually need first last and security, which is far less than the full down payment, but can be equal to the FHA down payment.  Taking the twenty percent down payment and investing in an indexed fund instead of buying can often result in a substantial gain versus homeownership, which has seen both large value increases and decreases in recent years (the S&P has returned 78% over the last five years).

          Portability.  Renting is for a fixed term, customarily for one year.  Many leases provide a right to terminate early for a two-month rent penalty (an attempt to make this a Florida law did fail).  This ability to move quickly is often better for single and married couples without children.  Having to move for a career opportunity as a homeowner can mean carrying a mortgage and paying rent on two places until the first owned home is sold.

          Given the initial costs, down payment, the burden of maintenance, the loss of the ability to move quickly means that the decision to buy instead of rent can be difficult for many people, especially if they are likely to need to move in less than five years.  Committing to longer term ownership is when the decision becomes in favor of homeownership, ultimately saving money in the long run.

Michael J Posner, Esq., is a partner at Ward Damon, a mid-sized real estate and business oriented law firm serving all of South Florida, with offices throughout Palm Beach County.  Michael specializes in real estate law and business law, and can help sellers, buyers landlords and tenants with their real estate issues.  Michael can be reached at 561.594.1452 or by e-mail at

Wednesday, August 24, 2016

Condo/Coop Retrofitting Fire Sprinklers - The Lowrise Debate Rages

In 2010, the Florida legislature changed Florida Statute Section 718.112(2)(l) to amend the rules regarding the requirement for retrofitting of sprinklers in condominium (and cooperative buildings under 719.1055(5)(a)).  The change removed the following key provisions:

For purposes of this subsection, the term "high-rise building" means a building that is greater than 75 feet in height where the building height is measured from the lowest level of fire department access to the floor of the highest occupiable story. For purposes of this subsection, the term "common areas" means any enclosed hallway, corridor, lobby, stairwell, or entryway. In no event shall the local authority having jurisdiction require completion of retrofitting of common areas with a sprinkler system before the end of 2014.

          This change has sparked a controversy as to whether all condominiums are now required to either retrofit sprinklers or vote to waive retrofitting no later than December 31, 2016.  This change was intentional and by doing so the legislature specifically intended the law to apply to all condominiums, not just high-rises.   As this is state law, it trumps any local limitation or requirement which would limit or not require such installation for condominiums under seventy-five feet in height.        

The starting point for compliance is the Division of Florida Condominiums, Timeshares, and Mobile Homes, the state body that regulates condominiums.  In its written statement on the issue the Division has stated that:

Condominium and cooperative associations are required to report to the division certain information regarding the membership vote to waive retrofitting requirements for fire sprinkler systems and handrails and guardrails. If the association does not waive retrofitting requirements, it must report the per unit cost of retrofitting to the division

The Division makes no distinction between high rise and low rise condominiums.  As a result of the change in the law and the Division not ruling that the law does not apply to condominiums below seventy-five feet in height, it means that absent a change, all condominiums and coops must either vote to waive retrofitting or start the retrofit process by the end of the year and report their actions to the Division.  As late as early July, 2016 Travis Keels, deputy director of communications for the Florida Division of Condominiums stated, “Generally speaking, the fire sprinkler requirement applies to all residential condominiums.”

However, due to contradictory laws relating to low rise sprinklers, there are now many voices asserting claims that the law does not actually require retrofitting for low rise condos/coops.  The Florida State Fire Marshall issued a statement saying that: “The Florida Fire Prevention Code… requires only high-rise buildings that do not have exterior access from each dwelling unit to be protected throughout by an approved, supervised automatic sprinkler system.”  However, the Fire Marshall also recognized that their office “…cannot interpret the provisions of Chapter 718.112, Florida Statutes.”

Senator Jerry Ring, a sponsor of the 2010 legislation that changed the law, has also commented on the issue.  He stated, in a letter dated July 28, 2016, to the Director of the Division of Florida Condominiums:

It is regrettable that the Division’s “interpretation” of a 6 year old statutory amendment comes to light through a newspaper quotation a mere 5 months before the opt out deadline expires, and at a time of year when many communities have difficulty conducting business (let alone owner votes) due to seasonal absences. While I recognize that the comments made were undoubtedly in good faith, they are simply an incorrect interpretation of legislative intent. Due to the amount of concern that this newspaper quote has generated, especially in light of its timing, I am requesting that the Division issue a press release consistent with the intent of the Legislature.

          The problem is while the letter is well meaning, it is not a change in the law, merely one legislator’s interpretation of the intent of the law.  Therefore, we are recommending that all condominiums and coops start the process to waive retrofitting by either a member meeting or a written consent to action. 

The written consent allows for votes to be collected from local and absent owners by signing a written statement voting to waive retrofitting.  Interestingly, the Division allows even Associations that do not have express power to approve matters by written consent to use this process, “Voting by written consents or written agreements may be utilized by an association regardless of whether the bylaws or the declaration specifically permit voting by written consents or written agreements.”  In order to waive the costly installation, the vote must be made by the “affirmative vote of a majority of all voting interests in the affected condominium.”  Now is the time act, as sufficient votes to waive must be received no later than the end of the year.

Michael Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist community associations in all legal matters including retrofitting votes. They can be reached at 561.594.1452, or at

Wednesday, July 6, 2016

Eight Real Estate Mistakes

1.       Deeds without estate status: So you want to add dad, mom or a brother to your Florida property, so you get a Quit Claim Deed from an out of state lawyer, an office supply store or online, fill it out and mail in to be recorded. Three years later they die, and when you go to sell you discover that in order to clear their interest you will need to file an ancillary administration in Florida.  $3,000 and a few months later you close and get to share the proceeds with their heirs.  This can all be avoided by using the proper language to effectuate what your intent is on that deed.  If you want the property to go to everyone’s heirs, do nothing, but if you want to be sure that the property goes to the surviving grantees, simply add, “joint tenants with full rights of survivorship, and not as tenants in common” after the grantee’s name and upon their death, the title goes to the remaining grantee without probate.

2.       Grandma’s Condo: If you own a second home/condominium in Florida and are a resident of another state, you can avoid two probates by simply deeding your second Florida property to yourself for life with a remainder to your chosen heirs. Then, when you die, no probate is necessary.  You can even keep full control by adding Ladybird Powers to your Life Estate Deed.

3.       Applying for Homestead: Florida’s constitutional homestead is an automatic protection arising as soon as you take residency of your Florida home.  However, the statutory homestead tax break requires that you apply by March 1 of the year after you purchase.  Forgetting to apply will costs you about $500 each year, and you will lose a 3% cap on annual appraisal increases. If you closed last year and did not apply, you can still submit an application and ask for a late filing waiver.

4.       Home Improvements: Getting ready to sell your house but need some work done that requires a contractor?  If it is a short job, you should change the automatic one year life of that Notice of Commencement required for permitted jobs to the actual time needed to complete the work.  Otherwise, when you do sell you will have to hunt down that contractor and possibly some subcontractors to get release of liens, even though the job was done on one week and it has been eleven months since your house improvement was completed.

5.       Loan Payoff Surprise: Many people are surprised at closing when their mortgage payoffs are far higher than their last mortgage statement.  For example, if you borrowed $500,000 at 5% five years ago, and you are closing August 10, (and you were told not to make the August mortgage payment) and your August mortgage statement says you owe $448,866.09 in principal, your closing statement could say you owe almost $3,000 more.  That is because mortgages are paid in arrears, meaning that the July payment you made was for interest in June.  So at that August 10th closing they are collecting interest on the principal balance from July 1 to August 10, plus a week extra to cover mailing in the payment.

6.       Mortgage Insurance: Did you purchase your home with less than 20% down?  Then you probably pay mortgage insurance every month.  The insurance is supposed to stop once the loan amount equals 80% of your home’s appraised value.  However, it is the owner’s responsibility to request this relief.  If you think you have hit 80% mark, contact your lender, because each month you delay could easily costs $83 per month for each $100,000 you borrowed.

7.       Rubber Hoses: Go in your laundry room and look at the hoses connected to your washing machine.  If they are black rubber then (i) confirm you have flood insurance; and (ii) get in the car and go to Lowes or Home Depot and buy braided stainless steel hoses in the same length.  Installation is easy, turn of the water to the washing machine, remove old hoses and install new hoses. Burst rubber hoses are probably the number one cause of flood in homes.  You do have flood insurance too?  Many do not so take the time and do one of the easiest fixes possible to protect your home.

8.       Mortgage Interest: Do you know what interest rate you are paying on your home mortgage?  Many people close on a loan when they buy and then never refinance, throwing away thousands of dollars.  If you borrowed $300,000 ten years ago at 6% you are paying $1,798 a month.  If you refinanced all $300,000, that full amount at today’s rate of 3.75% your payment would drop to $1,389 and after closing costs you would have about $40,000 in your pocket.  The smartest move would be to refinance only what you owe for 15 years.  Your payment would still be lower by $300 a month and you would shave another five years on your existing loan.  

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate law and business law, and can with these and other real estate mistakes (except the plumbing tip!).  They can be reached at 561.594.1452 or by e-mail at

Friday, March 18, 2016

Emotional Support Animals 2016 Update

     Emotional support animals have and continue to be a divisive issue in condominium communities, pitting the “no pet” contingent against those who desire to keep an animal to alleviate a disability.  The issue of fake service and emotional support animals has led to the Florida state legislature enacting a new law that criminalizes parties who falsely claim to have a service animal under the Americans with Disability Act (“ADA”): A person who knowingly and willfully misrepresents herself or himself, through conduct or verbal or written notice, as using a service animal and being qualified to use a service animal or as a trainer of a service animal commits a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083…

Unlike service animals under the ADA, the residential community issue falls under a separate law established under the Florida and Federal Fair Housing Acts (the “Act”).  Federal lawsuits under the Fair Housing Act, arbitration claims with the Florida Department of Business and Professional Regulation and Administrative Complaints with the United States Housing and Urban Development continue to be filed, as communities struggle with addressing requests for a reasonable accommodation.

Two main issues continue to be raised in the cases being filed by owners and associations.  First, is the person, in fact disabled such that the disability impairs or limits a major life activity.  In many cases, the letters from doctors or mental health professionals fail to properly document or substantiate that a disability, in fact, exists.  Instead, they describe certain ailments of the person they are treating without stating that the ailment rises to a disability that does impair a major life activity.  The disability letter must be clear that a recognizable disability exists and that the specific disability significantly impairs a major life activity.  For example, a statement from the medical professional that contains language similar to the following may be sufficient to meet the initial burden of the Act, “Due to (describe the disability), he has certain limitations which substantially affect the following major life activity, to-wit: (Describe how such disability affects the patient).”

The second test is that the animal in question must, in some fashion, alleviate the symptoms of the disability and the person making the request has a need for the assistance.  The animal does not have to be specially trained depending on how the animal alleviates the disability.  Some Associations will not approve an ESA without proof of special training and this can lead to a violation of the Act by the Association.   The same disability letter should state what and how the animal alleviates the diagnosed symptoms, and the medical professional could include language such as, “In order to help alleviate these disabilities, and to enhance the patient’s ability to live independently and to fully use and enjoy the residential unit located within the condominium, I have prescribed an emotional support animal that will assist him in coping with his disability by the following assistance (describe how animal alleviates the disability).  Assuming both tests are actually met, the Association, under the Act, is required to make a reasonable accommodation.

Several recent cases have addressed elements of these issues, but as these are ongoing cases without final resolution, it is not clear the ultimate outcome.  In a truly tragic case between Alexander Peklun and the Tierra Del Mar Condominium, both sides moved for summary judgment in a reasonable accommodation case. The background of this case is what Plaintiff alleges led to the suicide of the disabled owner. In denying both motions, the United States District Court in December, 2015 entered an order that included several rules that may help clarify the obligations of owners and associations.  First, a reasonable accommodation is not a lifetime grant, and an association has a reasonable right to request follow-up information.  Second, not all ailments are “disabilities” that the Act was intended to protect.  However, the court found that sleep apnea, did interfere with a major life activity and rose to a level of a protected disability.  Third, the emotional support animal is not required to have task specific training (this issue is often confused, as was in the Peklun case, between a service animal, which is specially trained, and an emotional support animal).

In a Texas 2015 case (Chavez v. Aber), the United States District Court found that an employee of an owner can be found liable for violating the Act.  The employee defended on the grounds that only the landlord corporate owner can be liable for violating the Act.  The Court denied that motion, finding that if the employee assisted the owner in violating the Act by not making a reasonable accommodation (and taking affirmative action to threaten eviction, raise rents, etc.), then such employee can be personally liable.  This case could be ultimately extended to Association Board members who abuse and harass legitimate homeowners seeking a reasonable accommodation.

As we can see, the law regarding emotional support animals is both confusing and evolving.  If you are a disabled owner, it is best to provide good documentation so as to establish the required need for a reasonable accommodation.  If you are an Association, it is best to establish, in advance, reasonable rules regarding emotional support animal requests, and to avoid discrimination claims by failing to properly review and approve such requests.

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist associations and owners in addressing emotional support animal issues.  They can be reached at 561.594.1452, or at

Monday, January 11, 2016

Reverse Mortgages - Pros and Cons

            In 1988, in an effort to keep older Americans in their homes, Congress passed the Reverse Mortgage bill, which authorized the Federal Housing Authority (FHA) and the United States Dept. of Housing and Urban Development to guarantee lenders who made home equity conversion mortgages.  These specialized loans are limited to individuals 62 years or older for loans secured by their primary residence, and for a loan amount that provides a sufficient equity cushion so that at maturity the loan may be repaid.  Reverse mortgages can be used on single family homes, condominiums and certain manufactured homes.

            Reverse mortgages do not require any payment of principal and interest as long as the borrower is alive or resides in the home as the primary residence.  Interest on the reverse mortgage (which can be fixed or adjustable) accrues until the loan is repaid.  The homeowner/borrower must still pay all taxes, insurance and maintenance on the residence. 

This waiver of payment is the main benefit of the program.  For example, a homeowner with a $250,000 mortgage paying interest at 5.5% with fifteen years left will be paying $1,419.47 each month in principal and interest. With a balance of $167,000 after fifteen years, and a home value of $400,000, a homeowner over 62 could obtain a reverse mortgage of $191,200, pay off the earlier loan, pay all closing costs (which are generally higher than most loans and one source of complaints about reverse mortgages) and have about $20,000 available to pay taxes and insurance (or a vacation).  After closing, the borrower will have the $1,419.47 in his or her pocket each month, an amount that may mean the difference between selling the home and keeping the home.

The funds from a reverse mortgage can be received in cash at closing, or available as a line of credit for future withdrawal.  The availability of a line of credit at closing requires that the borrower have sufficient equity for the new loan (in many cases, paying off the existing loan plus closing costs reduces or eliminates the amount available to borrow).  The proceeds from a reverse mortgage are not generally considered income and are not taxable, and will not affect social security or Medicaid benefits, but if the proceeds are held as liquid cash, that sum could disqualify a person from certain benefits and should be reviewed.

Loan repayment occurs when the homeowner dies, abandons the home or defaults under the terms and conditions of the loan (such as failure to pay taxes).  For death or abandonment, the homeowner or his/her family gets twelve months to sell the property to pay back the loan.  If the loan is not paid back, HUD may proceed to foreclose the loan, recover and sell the property to satisfy the debt.  Since interest is accruing without repayment, the value of the property may not be sufficient to pay-off the loan.  Unlike conventional mortgages (recourse loans), the borrower or the borrower’s estate is never liable for the loan or a deficiency due to the property being worth less than the loan balance (a non-recourse loan). 

Since their introduction, reverse mortgages have become popular; there are presently nearly 500,000 active loans. Originally a refinance only program, the law was revised in 2009 to allow these loans to be used to purchase a new home, so long as the borrower can pay the difference between the reverse mortgage loan amount and the purchase price of the new home.

There are several criticisms of the reverse mortgage program.  High upfront costs are an issue and are frequently not properly discussed with borrowers.  Interest rates are higher than conventional loans.  Pressure sales tactics (including late night TV ads) have encouraged seniors to take out reverse mortgages, spend the money on vacations and gifts, without consideration of the ability to pay and maintain the property going forward. 

Some elderly homeowners have been duped by the reverse mortgage/repair scam.  An inspector tells an elderly person that he or she need many thousands in repairs or the home will collapse.  Many cannot afford these “repairs,” but the scammer refers them to a home equity mortgage lender who arranges the reverse mortgage (even though the repairs are bogus or not necessary), taking huge fees from the unsuspecting owner desperate to fix the home.

Finally, some of the biggest critics are the children, who discover after their parents die that their house inheritance is worthless due to a reverse mortgage debt greater than the value of the home. Because of these issues, and the high default rate of nearly one in ten homes, HUD tightened lending requirements earlier this year to ensure that lenders carefully review borrowers’ financials to be sure they can continue to pay taxes and insurance required on the home.  In some cases, loans that used to be granted are now denied, and in other cases the amount loaned will include a required set-aside for payment of taxes and insurance, reducing the amount available to the homeowner.

A reverse mortgage can be a great tool for many homeowners, but it is a program that should be carefully reviewed to ensure that it fits an individual’s needs. Discussions with a CPA, your children and a HUD loan counselor are a must before taking out a reverse mortgage.

Michael J Posner, Esq., a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  He serves as the HUD Foreclosure Commissioner for the state of Florida.  They can be reached at 561.594.1452 or by e-mail at

Saturday, November 7, 2015

How Realtors Get Paid (a true commission story)

     Buying or selling a home is, for most people, the single most expensive transaction of their lives.  At the center of most real estate deals is the real estate salesperson, hired by sellers to list their property for sale, market and advertise the home, and then assist in the contract and sale; and used (yes, used, see below) by buyers to find and show buyers possible homes based on the buyers’ personal criteria, and then to assist in the contract and purchase of the home.  For these functions, a real estate salesperson is paid a commission based upon the sales price of the home.

     Traditionally, there were two types of realtors involved in a real estate transaction.  The “listing agent” was the person who was hired by the seller, placed the property on the multiple listing service (the MLS), and acted as the agent of the seller.  The “selling agent” was the person hired by the buyer, who helped the buyer find a property and acted as agent for the buyer.   In Florida, most realtors today act as transactional agents instead of as listing or selling agents. A transactional agent does not have a fiduciary relationship with the buyer or seller, nor does the transactional agent act as the single agent representative of the buyer or seller. However, a transactional agent does have a duty to deal honestly and fairly with both the buyer and seller, to disclose all known facts, and to use skilled care and diligence in the transaction. Despite the change to transactional agent status, payments are still traditionally made by the seller, and shared by the realtors involved in the transaction.

     Both the listing agent and the selling agent are traditionally paid from the seller’s proceeds. Pursuant to the listing agreement, the seller of the property has contractually agreed to pay the listing agent a commission upon finding a buyer ready, willing and able to purchase the property. Included in that agreement is the right of the listing agent to share a portion of his or her commission with a selling agent. So even though the selling agent is being technically paid from the listing agent’s commission at most closings, it appears on the closing statement that the seller is paying both the selling agent and listing agent separately. In rare circumstances, a buyer would hire a “buyer’s agent,” who generally acts in the same manner as the selling agent, but is instead paid directly by the buyer at the closing, with the listing agent receiving the full real estate commission from the seller without making any payment to the buyer’s agent.

     Traditionally, the amount of the real estate commission has been 6%. With both a listing agent and selling agent involved, each agent would receive one half of the commission, or 3%. Each realtor would then share a portion of that 3% commission with the broker (realtors in Florida cannot earn a commission, only licensed brokers). Generally, the split between realtor and broker is determined by the realtor’s independent contract with the broker, and varies from a 60/40% split for newer realtors, to a 90/10% split in favor of very experienced, successful realtors.  If the listing agent is also acting as the selling agent, the realtor will keep all 6% of the commission.

     The amount of the commission is determined at the time the seller enters into the listing agreement with the realtor. Some realtors are willing to negotiate the commission, but many will not, especially those who are very successful. One common reduced commission scheme is known as the 5/2/1 commission. With that type of listing, should the property be sold by the listing agent with the involvement of a selling agent, the total commission paid would be 5%, with the listing agent receiving 2% and the selling agent receiving 3%.  If the listing agent sells the house without a selling agent, the listing agent receives 2%, and if the seller sells the home to a buyer without involving the realtor, than the listing agent receives only 1%.  Keep in mind that the commission is what motivates the realtor to sell your property, and the best agents generally earn their 3- to 6% commission.

     Many people believe they can buy or sell a home without a realtor. As someone who has been in this business for over thirty years, it is my experience that in most cases you will still get the highest price only if you work with the realtor, and will find more homes as a buyer only when you work with a realtor. Working with a realtor who is familiar with your area (known as a realtor who farms an area) can get you inside information about communities, homes that have not been listed but may be for sale, and affiliates who can provide title, surveys, inspections, loans and other tools necessary when buying and selling homes. That is why, even though I could easily buy and sell property myself, I still work with a realtor when I sell and purchase.  If you do your homework and find the right realtor, you should have success whether you are selling or purchasing a home.

Michael J Posner, Esq., is a partner in Ward, Damon, Posner, Pheterson & Bleau a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate law and business law, and can assist buyers and sellers in loans and purchases/sales.  They can be reached at 561.594.1452 or by e-mail at

Wednesday, October 21, 2015

Unlicensed Practice of Law (Realtors and CAMS)

       Realtors and Community Association Managers provide valuable real estate services to sellers and buyers of real estate, as well as managing homeowners and condominium associations respectively.  However, in providing their respective services, they frequently have issues that have substantial legal ramifications in connection therewith and, in providing advice and opinions on same, run the risk of being accused of the unlicensed practice of law. Knowing what is permitted and what requires specific use of a licensed attorney is important for both Realtors and Community Association Managers.

          For Realtors there is a substantial dichotomy between drafting contracts and drafting leases. The Florida Supreme Court held in 1950 in the case of Keyes Co. v. Dade County Bar Association that the drafting of the real estate contract by a licensed realtor who was a party to the transaction did not constitute the unlicensed practice of law. In 1992 the Supreme Court was asked if the drafting of a lease constituted the unlicensed practice of law and while the Supreme Court declined to specifically state so, they did adopt a formal lease which appears to restrict drafting of leases by Realtors without legal counsel except by utilizing the Florida Supreme Court approved forms.

          Notwithstanding the right to draft contracts, Realtors can cross the line when they modify preapproved forms adopted by the Florida Realtors Association or the Florida Bar. In addition, the drafting of a substantive addendum to said form contracts can also lead to a claim of unlicensed practice of law. Realtors should err on the side of caution and avoid making any material, substantive changes to the form contract or an addendum unless aided by a licensed attorney.  Further, other than filling in the blanks on the Florida Supreme Court approved lease forms Realtors should not make any changes to the approved lease or utilize any other form lease unless done by a licensed attorney.

          In 1996, the Florida Supreme Court issued an opinion regarding the activities of Community Association Managers.  That opinion specifically set forth a number of areas in which the activities of a Community Association Manager would constitute the unlicensed practice of law. These activities included drafting of a Claim of Lien, preparing a Notice of Commencement, determining the timing, method and form for giving notices of meetings, determining the amount of votes necessary to approve any changes to the governing documents, and advising on the application of any statute or rule.
That opinion resulted in some confusion, and the Florida Bar Real Property, Probate and Trust Section (FRPTL) petitioned the Supreme Court to clarify that opinion regarding the areas or activities which, if completed solely by a Community Association Manager, would constitute the unlicensed practice of law. The Florida Supreme Court confirmed the 1996 opinion and further adopted the FRPTL proposed Advisory Opinion in its entirety.

This opinion expanded the 1996 ruling and clarified by listing fourteen activities, which, if conducted by a Community Association Manager, would constitute the unlicensed practice of law.  These include:

1.       The preparation of a certificate of assessment due once the matter is in collection with the Association’s attorney, after a foreclosure action has been filed or if a member of the Association has sent written notice disputing the assessed amount.

2.       Drafting amendments to the constituent documents of an association.

3.       Determining the number of days required for any statutory notice.

4.       Modifying the state approve limited proxy form.

5.       Preparing any documents in connection with the approval of new members to any Association.

6.       Determining the number of votes necessary to pass an amendment to the constituent documents or the number of people necessary to establish a quorum.

7.       Preparing pre-arbitration demand letters, construction lien documents, construction or management contracts.

8.       Reviewing contracts on behalf of the Association.

9.       Determining through an examination of title parties to receive notice from the Association.

10.     Any activity that requires statutory or case law analysis to reach a legal conclusion.

While these new rules do not greatly expand the limitations on the activities of Community Association Managers, they do clarify what limitations exist. However, in many cases, due to the original vagueness of the Florida Supreme Court opinion, it was not clear what activities would constitute the unlicensed practice of law. With the new opinion, community Association Managers have a clearer understanding of what they can and cannot do with regard to the enumerated items. Based on this new decision, it is clear that Community Association Managers will need to consult with an association’s attorney on a much more frequent basis in order to avoid a violation of this latest decision.

Even merely ministerial functions can be deemed to have crossed the line of what is illegal activity. Rather than make that determination for themselves Community Association Managers will be forced to seek legal counsel regarding such activities, potentially resulting in additional fees and costs for associations. 

          Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist Realtors and Community Association Managers in all legal matters.  They can be reached at 561.594.1452, or at

Links:  Various Cases