Executive Summary What has Gone Wrong in Our Community? Implications for Other Communities in the State of Florida Our Community Needs Help

• Nature’s Watch is a community of 182 homeowners in Pinellas County, Florida managed by the Eagles Reserve Homeowners Association.  The community consists of villas and town homes that were purchased from the developer at a price range of $125,000 - $240,000 (with the exception of a few double units) between 1992 and 1998. 

• This is a Planned Unit Development (PUD) with fee simple titles; therefore,  each homeowner was required to obtain individual homeowner’s insurance in order to obtain a mortgage.  The developer did not purchase a master insurance policy during his control of the association. 

• The covenants and restrictions of the Homeowner’s Association are ambiguous, confusing and leave room for interpretation. 

• ln 1992 the first six buildings or 24 homes began to have significant water damage.  At the time the problems were identified, the developer had full control of the homeowner’s association. The developer ignored many requests to fix the damages and in 1998 turned the homeowners association and the problems over to the community.  Without resolution from the developer, the homeowners in the first six buildings obtained legal counsel and sued the homeowner’s association to fix their homes. 

• ln July 2001, Judge Fred L. Bryson Jr. in the Circuit Court of the 6. Judicial Circuit for Pinellas County ruled that the homeowner’s association was responsible to fix the problems in the first six buildings.  The basis of his ruling was that, according to his interpretation, the homeowners’ association is responsible for the maintenance of the exterior of the buildings.  He defined the exterior of the buildings to be the inside paint outwards.  Because of the division in the community caused by the lack of clarity in the documents, Judge Bryson appointed a receiver to replace the Board of the homeowner’s association and to manage the reconstruction project.

• Because the homeowner’s association has never had a master insurance policy to cover the exteriors of the buildings, the reconstruction is being funded through assessments to the individual homeowners. Neighbors are paying to rebuild others’ homes while many homeowners have filed claims for collapse clause with their individual insurance carriers and have received payments ranging from approximately $17,000 - $140,000.  Because the association does not have insurable interest in the individual homes, the association has no legal means to collect these insurance payments.  While many homeowners will be losing their homes through foreclosures, others will be unjustly benefiting from the situation. 

In addition to bad construction, the homeowners are now dealing with mismanagement of the project.  The court appointed receiver has stated that he does not have the experience managing construction projects of this magnitude and complexity.  The receiver has not estimated a total project budget and simply assesses the community when the funds from the previous assessment run out.  To date each homeowner has been assessed $28,000 and total assessments are estimated to be in excess of $80,000 per homeowner.  This will be a total reconstruction cost of 16 million dollars.  All of this being managed on a time and materials basis and significantly over budget from the initial engineering estimates. 

Since the first assessment of $10,000 in the Spring of 2002, 10 homes are in the process of foreclosure and 1 is in bankruptcy.  In September of 2002, the homeowners received a notice of our next assessment of $14,000.  Each family was only given 4 days written notice to pay $4,000 of the assessment with the remaining $10,000 due in equal installments to be complete by January, 1, 2003.  In summary, the assessments while under receiver management have been the following: 

• March 1, 2002 $  3,333.33 
• April 1, 2002 $  3,333.33 
• May 1, 2002 $  3,333.33 
• September 25, 2002 $  4,000.00 
• November 1, 2002 $  3,333.33 
• December 1, 2002 $  3,333.33 
• January 1, 2003 $  3,333.33 

At this rate, we believe many additional families in our community will lose their homes. 

Even further compounding the community’s problems, after spending $2,000,000 reconstructing the first 6 buildings or 24 homes, air quality tests indicate and confirm the presence of Penicillium, Aspergillus and Stachybotrys mold.  Further testing of other units in the development are forthcoming. 

With so many possible foreclosures, how will the community pay to complete the project?  Will the rest of the community members be forced to pay the share of those who can not pay? It is unlikely that the banks will be able to sell the foreclosed properties to cover the outstanding mortgages because the market values have fallen below what some homeowners still owe on their property. There will be no more funds after the sale of the foreclosed homes for the assessments. 

Our community and many families have become victims and are being financially devastated because of substandard construction, county inspectors who approved construction not built to code and an overly complicated legal system.  We can not believe our court system and our county and state governments will allow so many families to lose their homes and leave the residents holding the financial burden of responsibility for a system that has gone awry. 

The American dream to own a home should not have become a nightmare. 
 

Substandard construction  Failure to maintain/repair community during developer control  Confusing and inadequate homeowner documents  Legal problems and court intervention  Receiver management  Communication  Practices and the need for an owner representative  Competent management  Reconstruction efforts  Financial concerns

The developer used substandard construction techniques and materials. 
The developer and developer-controlled board did not make necessary repairs to substandard construction. 
The developer did not meet his fiduciary responsibility as The Board of the Homeowner’s Association. 
The construction of the homes did not meet many county code requirements. 
County building inspectors approved the construction that did not meet code requirements. 
Significant water intrusion has occurred in the homes. 

* For the record, this builder/developer remains in business today building in the Tampa Bay area.

Documented Construction Problems
1.Roof tiles are improperly secured to the roof. 
2.Failure to utilize or improper application of adhesive for roof materials. 
3.Failure to secure roof pans to the underlayment. 
4.Failure to provide skirt flashing to the eave ends of the valley pans. 
5.Failure to adhere mitered in-fill pieces of tile adjacent to the standing seam. 
6.Failure to apply roof mastique at overlapping joints. 
7.Failure to properly install or construct the juncture of the garage roofs and the building walls. 
8.Failure to adhere the skirt flashing around hood vents, skylights, and plumbing vent pipes to the surrounding roof tile. 
9.Improper application of flashing over dormer-type windows and garage roofs. 
10.Improper application of elastomeric waterproofing coating on walls and other exterior areas. 
11.Stucco walls have developed material and significant cracking. 
12.Failure to provide flashings over the bottom edge of walls. 
13.Failure to provide or improperly performed caulking adjacent to the frames of windows. 
14.Improper  window construction permitting water intrusion. 
15.Improper attachment and construction of porches and side walls. 
16.Failure to pressure treat sill plates. 
17.Improper construction and connection of mechanical fasteners of the wall assembly. 
18.Inadequate draining provided around the buildings. 
19.Improper installation or failure to install chimney and related components. 

Code Violations 
1. Wood sole plates in contact with the foundation where plate foundation anchors, stud/plate clips and anchor bolts were improperly fastened, spaced, and in numerous areas missing.  Sections 1705.1, 1705.2 and 1706.1 of the Standard Building Code SBC were not adhered to. 
2. Areas of the base wall framing, sole plates, wall sheathing and wall framing less than 6 from adjacent grade, where pressure treated or a naturally durable wood species was required but not installed in order to protect against decay and insect damage per Sections 1703, 1703.1.1, 1703.1.1.3, 1703.1.4, 1703.2, 1703.2.5, and 1703.3 of the SBC. 
3. Areas of structural wood framing where the installation of structural load bearing members, connectors, fasteners and sub-sheathing did not follow (standard to the region) engineering practice per Sections 1701.2, 1701.2.1, 1701.2.2, 1701.2.3, 17012.4 and 1701.2.5 of the SBC. 
4. Areas of wall assembly structural sub-sheathing at openings and throughout the main body of the assembly where connections and mechanical fasteners are inadequately spaced per Sections 1711, 1711.1.3, 811.6.7 and 1705.1 of the SBC.  Observed numerous pieces of 4’x 8’ OSB sub-sheathing having only enough fasteners to hold it in place during erections. 
5. Areas of exterior stucco finish assembly thickness which measured +/- 3/8" to +/- 1-1/2" overall.  A variance of over 2" exists where there is a 7/8" nominal thickness requirement per Sections 1803.2.1, 1803.2.2 of the SBC and ASTM C926 and ASTM C1047. 
6. Balcony privacy walls (typical) with no required coping, flashing, or weatherproof materials necessary per Sections 1609, 1709, 1709.2, 1709.3 of the SBC. 
7. Roof and attic assemblies which have no ventilation of attic spaces as required to furnish cross ventilation of each separate attic space per Sections 1708.8, and 1708.1 of the SBC. 
8. Area of chimney flue missing allowing termination of open flue directly into the attic cavity.  Construction in place is negligent and in violation of Sections 802.1.1 and 802.1.2 of the SBC. 

• The homeowner’s association documents are confusing, inadequate and leave room for interpretation.

• The court interpreted the maintenance provision in our homeowner’s documents to require the reconstruction of buildings which was inconsistent with the expectations of the majority of homeowners. This court decision has exposed the homeowners to unlimited liability due to a lack of a master insurance policy and complete reconstruction of buildings in the name of maintenance. 

• Although each homeowner was required to obtain homeowner’s insurance when they obtained a mortgage, the judge has assigned responsibility to the association based on his interpretation of the documents.  The homeowners association has never had a master insurance policy.  Some individual homeowners have filed collapse clause claims and received payments under their individual homeowner policies. Because the association does not have insurable interest in the individual homes, the association has no legal means to collect these insurance payments.  Because of this insurance situation, some homeowners are having their buildings repaired by the assessment payments while retaining their insurance proceeds. In addition, once the insurance companies learned of the judge’s ruling, many have denied payment because they have stated that it is no longer their responsibility.  In addition, insurance companies are canceling or refusing to renew insurance policies in the community.

• The community and various sub-groups within the community have spent over $700,000 on legal fees trying to pursue various remedies through the courts. 

• Legal fees continue to mount during appeals and related legal matters controlled by two sub-groups within the community.  These two groups represent 20-30 homeowners while the remainder of the 182 have no voice and are being forced to pay for much of their legal costs.

The court appointed receiver has stated that he has a limited construction background.  The estimated total cost for the rebuilding of the community could be $16,000,000 in the receiver’s opinion but is actually unknown because no budget has been established.  This is a large complicated project to have someone with little experience managing the project. 

The reconstruction of the first 6 buildings is substantially over budget when compared to the initial engineering report estimates without an adequate explanation from the receiver. 

The community suggested that the receiver hire a "owner-representative" with construction and restoration experience to represent the community when making construction decisions but to date the receiver has rejected this recommendation. 

Observations of construction practices to date: 
Rebuilding of free standing lamp posts with no apparent damage from the outside. 
No roof materials or concrete tiles are being saved and everything is being replaced. 
Replacement of OSB Board with the higher cost option of plywood.  OSB is an adequate option when protected and sealed from the outside elements. 

Significant construction projects usually hire an independent "owner representative" to work with the architect and contractor to explore other value engineering efforts.  This has not been done to date. 

Inadequate Communication: 
The receiver has failed to provide adequate explanations in writing. Many homeowners have attempted individual inquiries.  Some have been responded to while others have not. 

The size of the assessments alone have been indicated to be $50,000 - $80,000 but in actuality could be unlimited since a total budget has not been developed and because of the high cost renovation process that is being applied.  The size and speed of these assessments will result in the loss of many families’ homes and no thought has been given to the end result of so many foreclosures. 

Understanding the impact of such large assessments, on September 26, 2001. Judge Bryson wrote in his brief, the first that you have to do is decide the extent of the project. 

After appointment on October 5, 2001, the community asked the receiver in his first meeting to assess the total liability for each homeowner so that each family could make an informed appropriate decision for their future.  It has been one year that the receiver has been managing our community and we have still seen no budget or total estimate. 

Some members of our community have asked for a monthly payment plan because of their inability to pay. He has not been willing to help these families. 

He has not developed a construction timeline and corresponding timeline of cash flows.  He is assessing when the monies run low and is giving inappropriate notice for families to produce the funds. We were given 4 days to pay $4,000 of assessments in September, 2002. 

The community was hopeful when the receiver appointed a community Advisory Board to allow the community to have a voice. The Advisory Board has not been used to date.

 
There is no adequate routine maintenance being done on the rest of the community. 
 

• Detailed information and reports.
• Have a "stay on top" attitude for problem areas.
• Keep all parties involved and made part of the information loop.
• Always adhere to the client’s procedures and policies
• Work in a cooperative atmosphere
• Create new disposition strategies
• Adhere to strict quality control guidelines
• Maintain strict confidentiality in the area of non-public information

• Original estimates to rebuild buildings 1-6 was $1,100,000 but it has already cost our community $2,000,000 (on September 11, 2002 the receiver stated that it has cost $350,000 per building) for this work and to date is still incomplete.  None of this information has yet to be provided in writing to the homeowners.

• In addition to the reconstruction of the first 6 buildings being over budget, the work was to be completed in August.  To date it is not complete and there has been no explanation to the community.

• To date the procedures to "repair" these buildings have been complete reconstruction including removal of 100% of stucco and replacement of all windows and roofs.  Would a reasonable homeowner tear off all of his exterior walls and replace almost all building components from the inside paint out at their own expense in case there may be a problem?

• After spending significant funds to rebuild buildings 1-6, air quality problems are surfacing and Penicillium, Aspergillus and Stachybotrys mold have been identified in the buildings.  The cost to fix this problem is unknown at this time.

• The mold issue is currently one of the largest issues in the insurance industry.  This is another example of potential exposure to unlimited liability for the homeowners.

• This proposal to assess each homeowner an estimated $80,000 is not economically feasible for most homeowners.  Many owners of homes that range from $125,000 - $240,000 (the majority of our community) can not afford such large assessments.

• The community has explored other means of long-term financing of the project such as a bank loan but have been unable to obtain a loan to date.  The only option given to date is assess and foreclose.

• Second mortgages have also been unsuccessful.  Without an estimated cost per homeowner, how can someone obtain a second mortgage not knowing the entire costs?

• As the problems persist, the assessed tax values of our homes have plummeted.  The assessment could soon be higher than the assessed tax value of our homes further making a second mortgage unobtainable.

• As more homes continue to be foreclosed on, lenders will soon not provide first mortgages.

• If many of the homes are in foreclosure, how will the funds be generated to complete the projects while the homes are in foreclosure?  Will the rest of the homeowners be required to pay for the foreclosed properties? 

• Families and retirees are watching their life savings disappear while others are being forced into financial ruin. 

• The size of the assessments is unprecedented without any ability to finance.

• Compounding our financial distress is the worst economy in 40 + years and this process is moving ahead without any flexibility.

• How many Florida residents live in a homeowner’s association?

• How many other homeowners associations in the state of Florida could be exposed to the same such liability?

• How many homeowners truly understand the implications and risks of their homeowners documents?

• Should a technical interpretation of your homeowners documents violate every principle of common sense? 

• Shouldn’t county inspectors protect you from inadequate construction or at least having your home built to minimum code requirements?

• How can the developer still be building other families’ homes in the Tampa Bay area?

Estimation of the entire project costs before moving ahead. To obtain private or government funds for the reconstruction and to make these funds available to individual homeowners to offset current and future assessments. Long-term financing to pay for the costs of the reconstruction.  If unobtainable through the private sector than sponsored or provided through public funds. Restructuring of assessments so that families do not lose their homes while the homeowner’s association tries to obtain responsibility from liable parties. Efficient management of the construction process by qualified, objective people. Development of a reconstruction plan and timeline based upon the findings in the evaluation of the entire community. Financial restitution from responsible parties/developer. A court approved solution for the insurance conflict created by the judge’s ruling.   Formation of a Homeowner Advisory Board to communicate with the receiver, express wishes of the community and eventually take over from the receiver.

• Welcome Statement
• Who Are We and What Have We Tried to Accomplish
• Rules of The Meeting
• Purpose of Community Summary
• Community Summary Presentation

LEGISLATIVE CHANGES!