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April 2010 Archives

U.S. Supreme Court Rules Against Class Actions in Arbitration

The United States Supreme Court just published its opinion in Stolt-Nielson S.A., et al v. Animalfeeds International Corp., 22 Fla. L. Weekly Fed. S269A.  In its holding, the Supreme Court determined that absent the express agreement of the parties or a state or federal law mandating it, a defending party cannot be forced to arbitrate separate contract disputes on a class basis.  The plaintiffs in the case had attempted to file a class action in federal court.  The class action was rejected on the basis that the individual contracts required arbitration.  The plaintiffs sought to pursue their claims in arbitration on a class basis.  The arbitrator approved the class action and the Federal Second Circuit Court of Appeals affirmed. In Florida, there are rules of procedure allowing class actions in the condominium and homeowner association settings.  Consequently, this holding by the Supreme Court is not likely to affect the ability of residents of condominium and homeowner associations to proceed on a class basis even where individual contracts call for arbitration.  Who the decision will affect are home buyers whose homes are not part of a community association.

The Challenge of Structural Distress in Aging Buildings

Several years ago, the federal government commissioned a study in Florida to determine the anticipated life of the structural components of condominium and apartment buildings.  The findings, assuming proper maintenance and barring hurricane impact, was 50 years. Unfortunately, despite this hopeful prognosis, for an ever-growing number of community associations, the realization is that a combination of poor construction details, and the effect of wind, salt and rain has led to major structural deterioration of buildings 20, 15 or even 10 years old.  Although there have been instances of structural failure affecting internal structural members, the majority of the problems have involved members exposed to the elements, notably balcony slabs and exterior columns. The problems may first reveal themselves by isolated rust stains or bleeding on building finishes.  Then, pieces of concrete or stucco may actually begin to fall off the buildings, damaging cars or threatening residences.  Often, however, especially where balconies are covered with finishes such as tile or outdoor carpeting, by the time the problem is discovered, the deterioration of the steel reinforcing in the structural member has progressed to the point where major structural repairs are necessary. According to the experts in the field, the key to the effective management of this type of structural deterioration is to catch the problem early and to protect the structural members before the damage becomes widespread.  Consequently, I recommend every community association, even those whose buildings were surveyed years ago, commission at least random surveys on a regular basis by competent consultants to determine if structural deterioration of the type described here is ongoing.   If problems are discovered, the next step would be to follow your consultants' recommendations as to appropriate repairs or maintenance.  Of course, especially in the case of enclosed balconies, repairs are likely to disrupt the individual owner's use and enjoyment of the unit, it should initially be determined through a review of your documents that the Association has jurisdiction over the repair of the structural member involved.  Then, policy decisions need to be made in advance, such as the timing of the work, how owners will be reimbursed for finishes altered in the repair process, how security will be assured if workers require access into individual units, etc.  Needless to say, forewarning through newsletters, special meetings, etc., of what is to be expected (including financially) is essential in short-circuiting anticipated owner dissension.  If necessary, I recommend that consultants be brought to a meeting to discuss the implications of not responding to sooner rather than later. It has become a given in the Community Association field that the only thing worse than having to assess owners for major repairs, is having to assess them a second time for repair work that wasn't done right the first time.  Previous Community Association articles have addressed appropriate steps for undertaking repairs or replacements (i.e. form of contract, supervision of the work, liens, warranties, etc.).  These steps are even more important when dealing with major structural repairs.   Finally, for buildings less than 10 years old, an analysis should be done as to whether there are responsible parties who could be pursued for the cost of repair or replacement.  The 10-year time period is a key because in Florida, there is a 10-year statute of repose for construction claims, meaning that even for a latent defect, if the building is over 10 years old, no court action is possible to cover for the repairs.  If the building is less than 10 years old, and the structural problems became evident only within the last four years, pursuit of the claims is possible.   Finding viable parties will undoubtedly be a challenge, but there have been successful recoveries for buildings even approaching 10 years old.

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