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As Legislative Session Approaches, Associations, Homeowners Should Be Wary Of Lawyers’ Motives

By Aaron L. Gordon, Esq., Corporate General Counsel; LM Funding, Tampa, FL

It’s hard to imagine how Florida’s elected officials could possibly sponsor or support legislation that could jeopardize the fragile real estate industry in Florida. The last thing we need in Florida is legislation or administrative rulings that further endanger our largest investment – our homes.

We saw this phenomenon last year with a bill which, in short, would have further limited a mortgage holder’s financial liability in terms of paying associations past due assessments on foreclosed units. This bill would have resulted in increased financial responsibility for homeowners. We can’t know for sure the motive behind sponsoring this legislation, but we do know if it had passed, it would have harmed the very constituents that your legislators are sworn to serve.

Fortunately, these bills didn’t receive the support needed to pass. Nevertheless, it is critical for boards to beware and to begin questioning their legislators about their stance on issues that are important to Florida’s community associations. As we approach the 2014 session, the Florida Bar has asked for an advisory opinion from the Florida Supreme Court, which would classify many of the usual activities of Florida’s Community Association Managers as the “unlicensed practice of law,” a violation of Florida Bar rules, and a crime. The practical effect of the ruling would increase costs to community associations. These are tasks that your association currently pays management companies a reasonable fee to perform. If re-classified these tasks would now have to be performed solely by an attorney. One thing we can all agree on, is when the lawyers get involved, everything gets more expensive. There is no reason for such a classification.

This controversial ruling could prevent property management firms and self-managed associations from sending out collection letters to delinquent owners because this action could be considered the “practice of law.” Property management firms and associations have been doing this contractually for decades. This activity does not require a legal degree or over-sight from a law firm. A community association is a corporate entity just like any other corporation in the State of Florida. There is no law on the books that says that a lawyer must be involved when a small business sends collection letters to its customers, and no rule or regulation that says that any other company needs an attorney to tell it when a quorum is present, or how to count votes, or run an election.

This ruling would simply provide another revenue stream for law firms. Lawyers would benefit, community associations would suffer. Homeowners will bear the brunt of increased fees for the tasks that have long been handled by a management company.

The Florida Supreme Court must determine the definition of the “unauthorized practice of law.” Several briefs and cases have determined that “setting forth a broad definition of the practice of law was “nigh onto impossible” (The Florida Bar v. Sperry.) Consequently, courts developed the following test to determine if an activity is the practice of law:

“if the giving of advice and performance of services affect the important rights of a person under the law, and if the reasonable protection of the rights, and property of those advised and served requires that the person giving such advice possess legal skill and a knowledge of the law greater than that possessed by the average person, then the giving of such advice and the performance of such services by one for another as a course of conduct constitute the practice of law.”

Numerous opinions from the U.S. Justice Department and the Federal Trade Commission have noted that similar efforts by lawyers in other states where this has been attempted are clearly anti-competitive and hurt the public. The bottom line is that the single most important concern is the protection of the public from incompetent, unethical, or irresponsible representation (The Florida Bar v. Moses).

While we wait on the Florida Supreme Court, residents must call legislators and urge them to file legislation that will protect homeowners from these types of unelected, predatory efforts by lawyers that will increase costs to homeowners. A good start would be to classify these contractual services provided by CAM’s as non-legal services that do not constitute the practice of law. Additionally, and perhaps most importantly, there should be required greater transparency and public input when it comes to how lawyers are allowed to pursue an Advisory Opinion to the Court. The process by which lawyers pursue what amounts to public policymaking is controlled by the same profession who benefits from it – lawyers. The public has largely been shut out from this process thus far. It is important that associations remain vigilant and question their legislators on bills that could damage the real estate recovery, and advocate for changes that can help to lower the cost of homeownership in the state.

Aaron L. Gordon, Esq. is Corporate General Counsel for LM Funding, LLC, a Tampa-based specialty financial services company that manages the receivables of hundreds of community associations throughout the United States. The Firm provides a variety of specialty financial products for community associations, with the goal of answering each association’s specific financial need. For more information, call 813-222-8996 or visit www.LMFunding.com

Story originally appeared on NaplesNews.com