Florida Community Association Construction Law Blog

WHEN IS IT JUST MOLD AND WHEN IS IT SOMETHING ELSE?

Alan E. Tannenbaum — Thu, 08 Oct 2009 10:16:38 -0500

Guest Article by:

Felix Martin, P.E., Principal
Marcon Forensics
Orlando, FL

While inspecting the interior of a residential unit, you observe black mold growing on the walls. Is it a sign of poor housekeeping or of more serious problems? Should you consider vacating the unit immediately or ignore it altogether?

Mold infestation is a widely misunderstood malaise, both in terms of overestimating and underestimating its potential danger. Because of this, it is important once mold is encountered to properly assess its source and the remedial action to be taken.

What we know as mold, fungus and mildew are generally the same thing. It is nearly impossible to completely remove molds from the environment. Molds reproduce through microscopic spores that exist in the air around us. At low concentrations, mold and mold spores are not harmful to animals, but molds release allergens and at higher concentrations can produce allergic reactions that may vary greatly from person to person. Generally, young children, the elderly and people with respiratory problems should avoid touching mold or inhaling higher concentrations of mold spores.

When relatively mild, mold infestation may be cleaned with a solution of house chloride mixed with water. Excessive infestation may require removal by mold removal specialists. However, mold removal may be just treatment of the symptom and not a complete solution. Cleaning visible mold may not address the causes for the mold to exist and may prove a short-sighted and expensive misguided solution.

For mold growth to occur, two things are needed: moisture and an organic food source. Mold growth on an interior wall generally uses the paper cover on the wall drywall as the organic food source. In a typically well conditioned interior air space, there is insufficient air moisture to encourage mold growth. Visible mold growth is a sign of excess moisture. If the source of excess moisture is not removed, simply cleaning the mold will not prevent its return.

Sources of excess moisture vary. If mold growth is observed at the ceilings or near air conditioning air vents, the cause of the excess moisture may be the mechanical system. Perhaps the air conditioning system is not removing excess moisture or is not running correctly, or the clothes dryer is not properly exhausting moisture.

Where mold is observed on wall areas near the bottom of exterior wall windows and doors, the excess moisture may be originating from rainwater leaking around the windows into the wall cavity. This is a much more troublesome problem in that if left unaddressed, may cause rotting of structural members inside the wall cavity, requiring extensive and expensive repairs.

If mold exists, it may be insufficient to call a mold removal company, as they generally treat the symptoms and not the disease. Particularly in cases where wall or ceiling mold has been removed and returned, it is important to contact a forensics firm to determine the source of the excess moisture. Only then can potential sources for the excess moisture required for mold growth be identified and an adequate remediation plan put in place.

Is there a "best suited" law firm for Developer Turnover Transition to Homeowners?

Alan E. Tannenbaum — Thu, 20 Aug 2009 10:19:31 -0500

HIRING TWO LAW FIRMS

Every condominium association should have a general counsel under retainer to advise on day-to-day operations and ongoing legal issues. During the transition period, general counsel can be of great assistance to a new Board in getting acclimated to the varied requirements:

Documents

State Statutes

State Administrative Rules & Regulations

Common Law (court-created law) Governing Condominium Operations

The transition period is also the time for the construction quality of the building and improvements to be evaluated and for Association financial operation during the period of developer control to be scrutinized. The type of law firm best suited to assist in the evaluation and to negotiate a resolution of possible claims is a trial firm experienced in negotiating and litigating condominium construction and accounting claims.

Our focus is on the evaluation and negotiation of turnover claims. Certain law firms you may consider will offer services on both accounts (general counsel and turnover claims). Although the concept of a “one-stop shop” may be initially appealing, the Board should closely scrutinize whether the firm being considered is as strong on the turnover claims side as it is on the general counsel side.

FIRM BACKGROUND

Our firm has extensive experience (over 30 years) representing community associations in negotiations with developers and other responsible parties to resolve construction warranty and financial issues arising at turnover.

Several of our clients outcomes:

the negotiated resolution of tens of millions of dollars of warranty

and accounting claims

one of the largest jury awards ($3.35 million) for a plaintiff

condominium association for a construction defects

OUR APPROACH

The first step would be for the Board to secure reports from engineering and accounting firms on the quality of construction and the condition of association finances during the period of developer control, respectively.

We can assist the Board in locating appropriate experts for this purpose and outlining the specific inquiries which should be made.

Once the results are in, Chapter 558, Florida Statutes, mandates a pre-suit notice and inspection procedure as a prerequisite for construction defect claimants pursuing their rights in court. Although most condominium association boards desire that their warranty claims be resolved without the need to resort to the court system, it is prudent to follow these procedures for no other reason than it keeps potential court resolution as a top-of-mind concern to the developer and other parties participating in negotiations.

Notice letters should go out to all parties potentially responsible for the defects, so an identification of the parties involved in the design and construction of the building is the first step in the process. In the notice letters, we will ask per the statute for file documents to be produced and invite the recipients to participate in a joint inspection at the site.

The recipients are required under the statute to submit proposals to resolve the claims, or in the alternative to reject the claims. Presuming offers are made, this would be the impetus for initiating negotiations hopefully leading to a settlement, which settlement could involve repairs or cash or a combination of the two.

Obviously, in order to evaluate offers and determine an appropriate posture in the negotiations, we would be working hand in hand with the Association’s experts.

FEE STRUCTURE

Our firm charges a flat fee to assist the Board in selecting appropriate experts, assisting in defining the matters to be addressed in the expert reports, evaluating the expert reports, preparing a detailed claims analysis and meeting with the Board to discuss the findings. We work on an hourly basis during the notice process. For settlement negotiations or litigation, we offer hybrid arrangements involving reduced hourly rates and partial contingency fees.

Court Ruling Favors Victims of Bank Scam - Victory by Levin Tannenbaum

Alan E. Tannenbaum — Tue, 21 Jul 2009 11:35:38 -0500

Court ruling favors victims of bank scam
By John Hielscher
Published Sarasota Herald-Tribune: Tuesday, July 21, 2009 at 1:00 a.m.

It took nearly six months, but a federal appeals court has denied motions to reconsider its decision that awarded victim status to hundreds of Coast Bank loan customers. Those Coast borrowers are now closer to sharing in restitution that will be paid by former Coast banker Philip W. Coon and his co-conspirator loan skimming.
The court's ruling also should help clear the way to imprison Coon, who pleaded guilty to federal charges in November. Sarasota attorney Alan Tannenbaum, who represents 156 Coast customers, said Monday he was happy to finally get the ruling.

"We hope for a speedy path to having the restitution claims completed, so that the borrowers who have lived with this thing for years can put this behind them," Tannenbaum said.

At issue was determining who were the victims of Coon's loan skimming scheme, Coast Bank or the loan customers.

Federal prosecutors, as well as Coon's attorney, contend that Coast was the victim. Since Coast is now defunct -- sold at steep discount in 2007 to First Banks Inc. of Missouri -- the federal government would take over Coon's assets through forfeiture.

But Tannenbaum, invoking the federal Crime Victims Rights Act, has successfully argued in court that the Coast customers were ripped off and should get restitution.

Their loans ranged from $180,000 to $360,000. They were overcharged an extra point, or 1 percent, so borrowers could receive from $1,800 to $3,600 in restitution.

Federal judges postponed sentencing for Coon and Tampa mortgage broker John Robert Miller, the co-conspirator who also pleaded guilty, until the victims issue was resolved.

The U.S. Attorney's Office or James E. Felman, Coon's attorney, can still appeal to the U.S. Supreme Court, although that is not considered likely.

The 11th Circuit of the U.S. Court of Appeals originally ruled in December that the Coast borrowers were victims of the fraud. Prosecutors and Felman filed motions for rehearing in January. The court denied those motions last week.

"We just received those documents, and we are in the process of reviewing them, so at this point we are not going to make any comment," said Steve Cole, spokesman for the U.S. Attorney in Tampa.

Felman said he has not discussed the latest ruling with his client.

"We have not made a final decision, but Mr. Coon has always admitted his guilt and has been desirous of going to jail and serving his punishment as soon as possible. He's not interested in delaying the proceedings," Felman said.

As part of their plea agreements, Coon and Miller will be ordered to each pay $1.5 million in restitution, representing the amount they skimmed off loans to Coast customers.

Coon has agreed to forfeit his Bradenton home, a second house, brokerage accounts, jewelry and other items. But that will not come to $1.5 million.

The former executive vice president and head of residential lending at Coast pleaded guilty to conspiracy to commit wire fraud and money laundering. He faces up to five years in prison and a $250,000 fine.

He admitted pocketing with Miller an extra 1 percent fee on Coast loans to build homes with Construction Compliance Inc., a defunct St. Petersburg builder.

Clients with Chinese Drywall Issues

Alan E. Tannenbaum — Mon, 13 Jul 2009 11:56:05 -0500

Sarasota Herald-Tribune Article on several of Levin Tannenbaum Clients with Chinese Drywall Issues - for homeowners dealing with Chinese-made drywall, the concerns grow more urgent with the arrival of a new child.

www.heraldtribune.com/apps/pbcs.dll/article

Drywall dilemma deep for parents GO OR STAY?

For homeowners dealing with Chinese-made drywall, the concerns grow more urgent with the arrival of a new child

By Aaron Kessler

Having a baby -- especially when it is a first child -- is enough of a challenge for most new parents. Now, a growing number are contending with an unexpected worry: Chinese drywall.

In Florida and other states, more homes are found each day that were built with Chinese-made drywall -- a material that is emitting corrosive and potentially hazardous gases. As state and federal inquiries drag on, leaving fundamental health questions unanswered, a new generation of babies are being born into a situation that leaves their parents in a dilemma.

"I just want a house I can live in," said Neil DeHenes, whose wife just gave birth to their first child, Sophie, in May. "My main concern is my daughter. Her respiratory system is just developing now. Her brain is developing. If it's causing me to get headaches and very painful sinus infections when I breathe it in, what is it doing to her?"

DeHenes and his wife left their Chinese drywall home in Riverview at their own expense just days before Sophie was born. Their builder, Tampa-based Suarez Housing Corp., has taken little action since the drywall was found in April. Now the DeHeneses have been forced to return temporarily after losing a short-term rental and are scrambling to find another furnished place to live.

"We just can't risk staying here any longer than absolutely necessary," Neil DeHenes said. "Even when we find something, I don't know how much longer we can continue to pay rent and the mortgage at the same time. We're already dipping into what's left of our savings."

No one from Suarez Homes would agree to discuss the company's use of Chinese drywall or the DeHeneses' case with the Herald-Tribune. Lisa Hower, an employee at Suarez's South Fork sales office -- visible from the DeHeneses' home -- directed questions to the corporate headquarters in Tampa. Multiple phone messages there were not returned.

In early April, Neil DeHenes was daydreaming about the adventures his first child would bring. That is when his home's air-conditioner failed. A technician determined that the copper coils were damaged. "The guy said, 'It looks like the effects of Chinese drywall,'" DeHenes said.

He contacted Suarez, but said the builder disagreed, claiming it used only American-made brands. "They said the copper in the A/C unit was from Mexico, that it was bad," DeHenes said.

Skeptical, DeHenes climbed into the attic to see if there were any markings on the exposed drywall. The stamps read, "Made in China."

Suarez then sent out an executive and other workers. They cut out drywall samples, but DeHenes later learned that Suarez had not tested the samples and would not pay to move him out.

DeHenes hired an attorney, who began sending letters to Suarez demanding action. In the meantime, the couple moved out on their own to a furnished town house in nearby Brandon.

DeHenes has had painful sinus infections for more than a year, but a series of expensive medical tests were inconclusive. His doctors previously wondered if his frequent airplane travel could be to blame. They now believe it is likely the drywall.

"If it was doing that to me, I can't take a chance on what it's doing to my daughter," he said.

Suarez has since indicated a willingness to make repairs, but executives have yet to say what exactly the company will do. The builder also wants DeHenes to sign a comprehensive waiver agreement absolving the builder of any legal liability.

Meanwhile, about 30 miles to the south, in the Lighthouse Cove neighborhood of Lennar Corp.'s Heritage Harbour development in Manatee County, another group of babies have begun moving back into homes originally built with Chinese drywall.

The wallboard has been removed from several dozen homes by the Miami-based company, one of a few builders to do so.

Lennar says the houses are now free of harmful gases, but some owners remain nervous.

Adding to that anxiety is Lennar's change of course regarding air quality tests. Multiple owners interviewed by the Herald-Tribune said Lennar promised to conduct tests before they moved back in, and then more several months later. Those tests have since been canceled.

"One of the big things was we wanted something saying everything was good and safe. We were hoping to get the air quality tests back, but when the time came we didn't get that," said Pio Rizzo, who along with his wife and their new baby recently moved back into their home on Montauk Point Crossing. "I hope it'll be OK, but there's still some worry about bringing my family back in and having a newborn here."

Rizzo considered refusing to move back in unless the tests were done, but ultimately concluded that it would only inflame the situation. He has not experienced the headaches or nosebleeds prevalent before.

Others who recently returned or who will do so soon were divided on the subject of the canceled tests. Several said they were disappointed, but did not want to rock the boat.

Others said they are happy.

"It's not an issue for me at all. I'm glad to be back in what is essentially a new house," said Carlos Cabrera, who recently moved back with his wife and 1-year-old.

Lennar said the tests were canceled after subsequent studies by its environmental consultant, Environ Corp.

Darin McMurray, Lennar's Southwest division president, said through a spokesman that Environ reached a conclusion that "no additional air quality testing is necessary once the defective drywall has been completely removed." The new policy applies to all Lennar homes statewide. McMurray said a one-year warranty Lennar has offered should provide enough assurance to owners.

The company said it has stopped telling affected owners they would receive the post-construction tests, but no exceptions have been made for those previously told otherwise.

Air quality testing can be difficult and yield inconsistent results. Environ's own tests have been criticized by state and federal health officials. Its report made public earlier this year, which concluded there was no health risk associated with drywall gases, resulted in data that Florida's state toxicologist, Dr. David Krause, called "inadequate," prompting the state to push for more expansive testing.

Meanwhile, owners like Neil DeHenes, with the Suarez home in Riverview, would be glad to see his builder deal with the problem.

"I really don't know what to do anymore," he said. "This wasn't how I pictured we'd be having our first baby."

What You Need To Know About Short Sales, 6/17/09 at SAR Headquarters

Alan E. Tannenbaum — Tue, 02 Jun 2009 16:11:35 -0500

Cancellation of Debt - 1099-C: Short Sale on Property

1099 A and 1099C: Do you know what it means? Do you know the impact on the sale of your property?

What do you know about the 1099-C form, and Cancellation of Debt? Find out at a special seminar set for Wednesday, June 17th from 9 to 11 a.m. at SAR. The event is presented by the Realtor-Attorney Committee, a joint committee of SAR and the Sarasota County Bar Association.

Hear from Jerry Levin, Esquire from Levin Tannenbaum, Renea Glendinning, CPA from Kerkering Barberio, and other attorneys regarding this important topic.

The cost is $10 for SAR members and $20 for non-members. Register online by visiting the Sarasota Association of Realtors.

Jerry Levin's Presentation on Short Sale - 1099C Cancellation of Debt IRS Implications, "Kicking the Down-and-Out Taxpayer" - Jerry Levin is a Real Estate Board Certified Lawyer with the Levin Tannenbaum Law Firm

Sarasota Association of Realtors 6-17-09 Seminar

“Kicking the Down-and-Out Taxpayer”

A. Notification to the IRS by Required Person or Entity:
The IRS will cross check this information against the tax return filed by the taxpayer.

a. The obligation to Report is the obligation of the taxpayer; exception or non inclusion of income is the burden of the taxpayer to establish
b. The obligation to Notify is the obligation of the Defined Person or Entity.

B. 1099 Defined: All forms and types of reportable income:

Definition: Employer or Payor notification of income in excess of $600.00 paid to a person or entity.

1099 A: Acquisition or Abandonment of Secured Property in conjunction with a foreclosure
1099 C: Cancellation of Debt
1099 B: Broker and Barter Exchange: (1) barter, (2) change in corporate capital structure,
(3) sale of stocks, bonds, future contracts..
1099 Cap: Transaction involving in excess of one million dollars as part
of the change in capital structure or merger or corporate entities.
1099 Div: Dividends and Distributions
1099 G: Government payments. Unemployment, refunds
1099 H: Health Coverage Tax Credit
1099 OID: Original Issue Discount Interest
1099 Int: Interest from banks…
1099 LTC: Long Term Health Care benefits, Viatical Benefits
1099 Misc: Payments not reportable in other forms, payments to attorneys, payments of rent
income, payments of royalties, payments to informers …
1099 PATR: Taxable distributions from cooperatives:
1099 Q: Payments from qualified education programs
1099 R: Distributions from Pensions, IRA, annuities; Profit sharing plans, insurance contracts.
1099 S: Sale or Exchange of real property, primary residence, lease hold interest, timeshare,
life estate, easements, remainder interest, timber royalties, condemnation award,
land contract
1099 SA: Distributions from HSA, Archer MSA, Medicare Advantage MSA.
C. Basic Concepts:
1. 1099 A and 1099 C can be reported on 1099 C Only
Exception: seeking deficiency judgment
2. 1099 C:
a. auto repossession
b. credit card debt
c. work out modification
d. foreclosure
e. certain student loans
3. Identifiable Event: as defined in Code and a Date of discharge
D. Exclusions or Exceptions to be proven and asserted:
a. insolvency
b. bankruptcy
c. qualified farm indebtedness
d. qualified principal residence
e. qualified disaster indebtedness
f. qualified real property business indebtedness
g. Guarantor
h. non recourse debt
i. cancellation is intended as a gift; has limitations to gifting rules currently
$13,000/per person
E. Primary Residence: Exclusion limitation
a. limitation of canceled debt: Two Million ($2,000,000.00),
One million if married and filing separately
b. the funds canceled must have been used for acquisition, build or substantially
improve the home.
c. a reduction in basis required
d. applies to calendar years 2007-2012

F. Caution and Traps:
a. refinanced funds used to pay credit card debt, auto purchase,
investment in other real property, other debts.
b. refinance exceeds original principal debt and used for non qualified purposes
c. reduction of tax attributes (form 982)
d. reduction of tax basis in qualified principal residence

G. Report Sale: Gain or Loss
a. foreclosure
b. deed in lieu
c. short sale

H. Investment Property:
a. loss from the abandonment of business or investment property is ordinary loss.
b. insolvency exception applies
c. report of gain or loss applies

I. Negotiation Strategies:
a. assignment of debt instrument to independent third party; then apply gifting rules, or non
reporting rules. Be careful of related party rules.
b. modification to non recourse debt
c. reporting of disputed liabilities: release and settlement agreement states that no 1099
shall be issued because this is a settlement of disputed litigation and not a cancellation of debt.
d. cancellation does not occur immediately
e. unpaid deficiency judgment
f. delay cancellation until subsequent reporting year
g. release of co obligor if others remain liable
h. Where the nature and amount of indebtedness are contested in a good faith dispute, and a
compromise settlement is reached, the excess of the stated principal amount of the
claimed debt over the amount for which the liability is settled does not constitute
discharge of indebtedness income. Preslar v. Commissioner T. C. Memo 1996-543 revd.

167 F. 3d 1323(10th Cir. 1999)

Resources:

IRS.Gov
Publication: 4681
Publication: 544
Instructions for 1099
Treasury Regulation 1.6050P-1
T.D. 8654
Form 982
Insolvency Worksheet
Worksheet for foreclosures and repossessions
www. Taxalmanac.org
www. Legalbitstream.com
www.cornell.edu
T.C. Summary Opinion 2006-43, United States Tax Court, Martins v. Commissioner, 2006

Sarasota Association of Realtors 6-17-09 Seminar

Jerry Levin, is Board-Certified in Real Estate Law and will be discussing
the IRS Legal Implications of #1099A and #1099C
“Kicking the Down-and-Out Taxpayer”

A. Notification to the IRS by Required Person or Entity:
The IRS will cross check this information against the tax return filed by the taxpayer.

B. 1099 Defined: All forms and types of reportable income:

Definition: Employer or Payor notification of income in excess of $600.00 paid to a person or entity.

167 F. 3d 1323(10th Cir. 1999)

Questions:

1. I don’t agree with the information on the Form 1099-C:
Answer: Contact the lender for a corrected form and retain your records

2. (a) I did not get a 1099 A or C but I did get foreclosed. Do I have to report the sale and cancellation
of debt?
Answer: Yes, the event of a foreclosure, short sale or deed in lieu is a disposition of real property which must be reported as a sale.

(b) I did not receive a 1099-C but my debt was not repaid and my debt has been discharged. Do
I have to report the cancellation of debt?
Answer: Yes, the non receipt of a Form 1099 does not convert a taxable item into a non taxable item.
T.C. Memo 1992-317 affd; Vaughan v. Commissioner, 15 F.3d 1095 (9th Cir. 1993)

3. Do I have cancellation of debt if I borrow money from a commercial lender and it is not secured by a
mortgage but I pay off the loan at a discount?
Answer: Yes, the relief of the amount of discount is reported as ordinary income. This is no different
then negotiating a reduction for payment of credit card debt. If the loan was non recourse then no cancellation of debt occurs.

4. Can I claim a loss on the sale of my primary residence?
Answer: No, losses from sale of personal property are not deductible.

5. Can I exclude home equity line of credit?
Answer: Yes, if funds specifically used to buy, improve or build your home, otherwise No.

6. Can I exclude debt on my second home?
Answer: No, not under the Mortgage Forgiveness Debt Relief Act of 2008 and 2009. However, try the insolvency exception.

7. How do I know I am insolvent?
Answer: You are insolvent when your total debts exceed the total fair market value of ALL your assets
on the date of the cancellation of debt or foreclosure. (including IRA, 401K)

8. Can I exclude the entire loan amount of the refinance debt of my primary residence?
Answer: No, the refinance amount is limited to the principal amount refinanced originally which is qualified principal residence debt. (buy, build improve). However, if the refinance was used to improve
the property you may be able to exclude these sums.

Resources:

America's Premier Lawyers Series: ABC Radio with Alan Tannenbaum

Alan E. Tannenbaum — Fri, 03 Apr 2009 07:19:16 -0500

Alan Tannenbaum was recently a guest speaker on America's Premier Lawyers Series on ABC RADIO, along with Jeff Raizner, of Doyler Raizner LLP.

You can "LISTEN IN" to our interview by following this link to their website: "Americas Premier Lawyer Series - Top Verdicts"

So you think you have Chinese Drywall, what next?

Alan E. Tannenbaum — Wed, 01 Apr 2009 13:56:13 -0500

THE CASE OF THE SMELLY DRYWALL - "CHINESE DRYWALL"

We have been visited by several prospective clients concerning drywall in their home that is causing bad odors, has damaged copper air-conditioning and electrical components and may be making their family members ill.

We represent one of the affected Lennar owners and they are working things out with Lennar. Lennar is gutting their house, repairing all damaged electrical and air-conditioning components and putting it all back together.

Lawyer Challenges How Builders Are Handling Chinese Drywall

Is Chinese Class Action Suit The Best Way To Go, No, Says Sarasota Construction Lawyer, Alan Tannenbaum

Some of these potential clients have chosen to retain other law firms, some of whom surprisingly represent contractors in the normal course of their practice, on the prospect that the issues be addressed through a class action. I personally do not see these issues appropriate for a class action because, among other reasons, several different builders and manufacturers are involved and each case is factually distinct (whether it is an isolated case or an entire block of owners involved, where the bad drywall is in each home, health impact, etc.). This does not mean that there would not be benefit to the affected owners working together, I just don't see this as appropriate for class action treatment.

One other more practical issue if indeed a builder like Lennar is the target of a class action on this issue is whether such a pursuit will be the straw that broke the camel's back as far as Lennar surviving the current economic downturn. If you have a builder prepared to step up and make things right, forcing them to spend millions of dollars in defense costs may lead to bankruptcy and nobody being satisfied.

Of course, Lennar, like any builder, should not be given free reign on its approach to the remedial work. As a Board-Certified Construction Lawyer who has represented consumers for 30 years, these are issues that should be addressed with every builder involved:

1. that all affected residents and tenants are cleared health wise;
2. that all the bad drywall is in fact removed from each house. Remember that many houses have this stuff mixed with other brands;
3. that the drywall is properly disposed of;
4. that all exposed copper in the air-conditioning systems and electrical outlets is inspected and replaced where deteriorated;
5. that the reinstallation of electrical and air-conditioning components is completed by licensed trades under proper permit and inspection;
6. that new drywall is hung by qualified people under proper permit and inspection;
7. that all finishes are properly reapplied by qualified people;
8. that home warranties are extended
9. that homeowners are compensated for alternative housing and lost
rental (in the case of tenants).

U.S. Agency Sets Inquiry - Chinese Drywall

Alan E. Tannenbaum — Fri, 27 Feb 2009 11:19:12 -0500

U.S. agency sets drywall inquiry

Sarasota Lawyer Questions Drywall Safety and Process to Replace

Investigators to determine if Chinese material poses safety risk by AARON KESSLER, Staff Writer: comments by Alan E. Tannenbaum

Federal investigators with the Consumer Product Safety Commission are now on the ground in Florida, the first step in a more intense probe into contaminated Chinese drywall.

The commission has been in discussions since January with officials in Florida, as well as the U.S. Environmental Protection Agency. But the launch of a formal compliance investigation now brings the full power of the federal government to bear on the problem for the first time.

"We are stepping up the analysis to more comprehensively look into this," said Joe Martyak, a commission spokesman. "The important thing now is to get the facts."

The commission has the authority to issue a "stop sale," which would effectively ban a product from being sold or imported. It also can issue a formal recall, which would require that Chinese drywall be removed from all affected homes.

Word of the federal investigation came as the owners of one of six homes being repaired by Miami-based Lennar Corp. in Manatee County's Heritage Harbour development ordered that all work be halted on their house.

Dan and Janet Tibbetts of Montauk Point Crossing worry that wood studs and framing in the house still emit an odor even after the Chinese drywall was removed. They also want an independent inspector to evaluate the home -- including examining all metal components for signs of damage -- before Lennar rebuilds the walls.

The last-minute order was sent as Lennar contractors were on the verge of installing new drywall Monday.

Through a spokesman, Lennar division president Darin McMurray said, "Although Chinese drywall has been found in homes constructed by many South Florida builders, Lennar has been by far the most proactive in working with our homeowners to fix the problem. We will continue to work closely with our homeowners to address all of their concerns during the repair process."

The Tibbettses have hired Sarasota attorney Alan Tannenbaum, who specializes in construction law and who faxed McMurray the formal cease-and-desist order Monday afternoon.

"We think there's a step that has been missed," Tannenbaum said. "All the drywall was pulled out, and that was a good start. But there needs to be an evaluation of what damage this material has wrought on the home -- an examination of the metals and the framing to see whether they are OK before things are closed up. We also need to figure out what's causing the continued stench."

Several experts believe the drywall gases may have permeated the wood framing, causing cross-contamination that can result in the wood continuing to produce a foul odor.

Tannenbaum said the wiring is of particular concern because of the risk of fire if it were to fail. Lennar intended to leave behind much of the wiring in the Tibbettses' home, saying that insulated wiring was not affected, only the exposed wires.

"Knowing how damaging these gases have been, how do you know that underneath the covering it hasn't deteriorated?" Tannenbaum said. "It may turn out to be OK, that would be great, but we think someone needs to at least look at it first to be sure."

Martyak, with the Consumer Product Safety Commission, said the risk of fire also would be at the heart of his agency's investigation into affected homes.

"The goal is to determine if there is a safety hazard, and when you have wiring potentially corroding, that will be a very important concern," he said.

Commission investigators will be in Florida for the next several weeks gathering information, Martyak said, declining to specify where they were, or to what counties or regions they would be traveling.

One of the largest concentrations to date of Chinese drywall has been found in Southwest Florida, but America's Watchdog, a national consumer advocacy group based in Washington, D.C., says its investigations have found defective Chinese drywall in Florida, Arizona, Colorado, Georgia, Louisiana, Maryland, Nevada, New Jersey, New Mexico, North and South Carolina, Virginia and Texas.

The Herald-Tribune reported on Feb. 1 that shipping records show at least 550 million pounds of Chinese drywall has been offloaded at U.S. ports since 2006 -- enough to build 60,000 average-size homes.

Other builders who used Chinese drywall, according to the builders themselves, customers and attorneys, include Taylor Morrison, WCI Communities, Meritage Homes, Ryland Homes, Standard Pacific Homes and Aubuchon Homes.

On Feb. 13, U.S. Sen. Bill Nelson, D-Fla., sent a letter to the Consumer Product Safety Commission and the EPA asking both agencies to jointly investigate whether the Chinese drywall is toxic, and to determine the extent of the damage potentially being caused to people's homes.

"The commission needs to work with the EPA and other agencies to quickly determine the extent of problems with this drywall, order necessary remediation and create new safety standards to keep this from happening again," Nelson said Monday in a statement.

Nelson's legislative counsel, Christopher Day, said commission investigators are putting together a growing list of homes they will inspect during their first Florida visit.

Day said that given the scope of the potential problem, getting federal agencies involved opens the door to resources not available to state or local authorities.

"They have testing facilities that go beyond what is available at the state level," Day said.

One of the biggest challenges in testing the Chinese drywall to date has been the expense and the fact that only a few labs are capable of analyzing the tiny components causing the problem, which are measured in parts-per-billion or even parts-per-trillion.

The only testing released so far has been from labs hired by either a builder or a manufacturer. Day said that it seemed appropriate for an independent agency to become involved.

"Bringing in a completely neutral party we think would be useful," he said.

Chinese Drywall Class Action Is Not The Way To Go

Alan E. Tannenbaum — Tue, 10 Feb 2009 09:15:14 -0500

"A lot of the builders involved have been reluctant to do anything at all, with the exception of Lennar," Chaikin said. "They have just said, 'We're studying the issue and will let you know,' or they simply say nothing. If the builders won't cooperate we have recourse against them."

Besides Lennar, other builders that used Chinese drywall include Taylor Morrison, WCI, Meritage, Ryland, Standard Pacific, and Aubuchon, Chaikin said.

Lee County's Aubuchon Homes -- owned by State Rep. Gary Aubuchon, R-Cape Coral -- used Chinese drywall in the North Fort Myers house of Florida Lt. Gov. Jeff Kottkamp.

But not everyone is convinced class action is the way to go, including Sarasota attorney Alan Tannenbaum, who specializes in construction law.

"It puts everybody in a defensive posture, and you could be talking about a multi-year battle now, where, in the end, the individual owner might not really get that much compensation," he said. "The question should be, how do I ensure I get my house fixed correctly?"

A single homeowner trying to take on a builder alone also stands little chance of making progress, but there are other choices, Tannenbaum said. One of the best things homeowners can do is involve their lenders, who have a strong financial incentive to get the situation resolved, he said.

"Once you get your lender on board, and as a group when the neighborhood gets all of its lenders involved, suddenly the owners have more power," Tannenbaum said. "Most builders cannot do business without the banks, and therefore when the lenders talk, they listen."

Lenders also can defer mortgage payments, which can solve the most immediate problem facing some Chinese drywall victims: getting out of a defective home.

"They're desperate, because the smell is awful, they're maybe feeling sick all the time, the house is corroding," Tannenbaum said. "If they could afford to, they would be out of there in a second. But they can't afford to pay their mortgage and then rent."

Defending Victim Rights: Dispute Is Over Coast Verdict

Alan E. Tannenbaum — Tue, 20 Jan 2009 11:12:52 -0500

Sarasota Herald Tribune, 1-27-2009 "Dispute Is Over Coast Verdict": Alan Tannenbaum defending the rights of victims of financial fraud (article posted by Tricia M. Foster)

As part of the plea deal, the government agreed that Coast Bank, not the borrowers, was the single victim of the crime.

But Sarasota attorney Alan Tannenbaum, who represents more than 140 Coast loan customers, convinced the 11th U.S. Circuit Court of Appeals in December that the borrowers were victims under the federal Crime Victims Rights Act.

Federal prosecutors have filed a motion for a rehearing with the Atlanta court of appeals on the grounds that it had improperly characterized the borrowers as victims.

"The filing is notable if for no other reason than that it is the first time nationwide that federal prosecutors have joined forces with a criminal defendant to ask an appellate court to rehear a case in order to take away legally recognized rights of victims," Tannenbaum said Monday. "It is very inconvenient for the government to have victims of a crime at the table with the defendant."

www.flcommunityassociationlaw.com/uploads/file/00172774.pdf

www.heraldtribune.com/article/20090127/ARTICLE/901270335/2055/NEWS

CAI Suncoast Breakfast: Legal Panel Q&A

Alan E. Tannenbaum — Mon, 19 Jan 2009 16:33:11 -0500

Community Associations Institute - Suncoast Chapter: Come have breakfast while CAI provides you updated information valuable to every board member and every unit/homeowner as an aid in providing the best management of your association.

“Almost” Free Legal Advice

Speakers: Alan Tannenbaum, Esq. – Levin Tannenbaum

Michael Brudny, Esq. - Brudny & Rabin, P.A.

Jonathan Damonte, Esq. – Jonathan James Damonte, Chartered

Anne Hathorne, Esq. – Becker & Poliakoff, P.A.

Where: Holiday Inn Select **NEW LOCATION**

3535 Ulmerton Road, Clearwater

When: Thursday, February 12, 2009

Breakfast 8:30 AM, Program 9:00 AM

Cost: $15.00 each CAI Member/$20.00 each non-member

Please RSVP by Monday, February 9, 2009.

Payment in advance is appreciated – No shows will be billed.

Program Sponsor

Alderman & Price Associates, CPA’s

Progressive Management

Habitat for Humanity Sponsors

Bay Area Disaster Kleenup

___________________________________________________________

Breakfast Registration February 12, 2009

CAI Member? Yes ___ No _ Late Registration___

Company:_____________________________________________________________________

Name(s): _____________________

Phone: Number people to attend: _________________

Amount Enclosed:

Reservations MUST be in writing. This is your invoice.

You may fax your reservation to (727) 345-0170 or email lhagan@suncoastcai.com.

Mail payment to:

CAI – Suncoast, 5701 – 1st Avenue South, Suite A, St. Petersburg, Florida 33707

Please make check payable to CAI Suncoast – NO Credit Cards Accepted

Phone: 727-345-0165 Fax: 727-345-0170

Finally...Automatic Class Action Standing for Florida Homeowner Associations

Alan E. Tannenbaum — Tue, 30 Dec 2008 18:45:55 -0500

Until 2008, Florida condominium associations had a distinct advantage over Florida homeowner associations as far as pursuing construction defect and financial claims on a class action basis. Basically, Florida condominium associations by court rule since 1977 had automatic standing to represent their owners as a class on matters of common interest. Florida homeowner associations, on the other hand, had no standing to represent their members as a class. Members of homeowner associations were relegated to bringing a traditional class action with individual members acting as class representatives on behalf of the members. The procedure for attaining class action status in a homeowner association context was cumbersome and time consuming.

The newly adopted Florida Rule of Civil Procedure 1.221 reads:

HOMEOWNERS AND CONDOMINIUM ASSOCIATIONS

A homeowners' or condominium association, after control of such association is obtained by homeowners or unit owners other than the developer, may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all association members concerning matters of common interest to the members, including, but not limited to: (1) the common property, area, or elements; (2) the roof or structural components of a building, or other improvements (in the case of homeowners. associations, being specifically limited to those improvements for which the association is responsible); (3) mechanical, electrical, or plumbing elements serving a property or an improvement or building (in the case of homeowners. associations, being specifically limited to those elements for which the association is responsible); (4) representations of the developer pertaining to any existing or proposed commonly used facility; (5) protests of ad valorem taxes on commonly used facilities; and, in the case of homeowners' associations, (6) defense of actions in eminent domain or prosecution of inverse condemnation actions. If an association has the authority to maintain a class action under this rule, the association may be joined in an action as representative of that class with reference to litigation and disputes involving the matters for which the association could bring a class action under this rule. Nothing herein limits any statutory or common law right of any individual homeowner or unit owner, or class of such owners, to bring any action that may otherwise be available. An action under this rule shall not be subject to the requirements of rule 1.220.

Unfortunately, what the Florida Supreme Court did in providing automatic class action standing for homeowner associations was not coupled with the Florida Legislature, as it had done long ago for condominium associations (F.S. 718.203), inserting developer and contractor warranties of fitness and merchantability into F.S. Chapter 720 (homeowner associations). As a result, even though the procedure to get into court as a class has been made significantly easier for member of homeowner associations, identifying sustainable causes of action for securing compensation remains a challenge.

How Was Your Money Attended to Pre-Transition?

Alan E. Tannenbaum — Tue, 30 Dec 2008 18:34:12 -0500

Florida community associations are big businesses, with annual budgets for larger projects running into the tens of millions of dollars. At its inception to the point of transition to owner control (which usually is at least a couple of years), each association is operated by a board of directors appointed by the developer. During this "pre-transition" period, these developer-appointed directors are running the business of the association (collecting revenue, expending money, contracting for services, performing maintenance, establishing or waiving reserves, etc.). From the point each new owner closes on their unit or parcel, each is a shareholder and contributing member in the association.

Developer-appointed directors of Florida community associations have a fiduciary duty to the members of the association. In essence, they are charged with operating the association during the pre-transition period in accordance with statutory and documentary requirements and good business practices. It is a prudent practice for the initial owner board of directors post-transition to review association operation pre-transition to assure that association finances were properly administered. Possible issues to be explored are:

Were all assessments collected and in the appropriate amounts?
If there was a developer guarantee, was it funded in the correct amount?
Were reserves funded?
Were association funds expended only for association purposes?; and
Were contracts entered into fair and reasonable?

We strongly recommend that every Florida community association upon going through transition retain a forensic accountant knowledgeable in community association matters to review the developer's audit of pre-transition finances, as well as financial records of the association turned over as part of the transition process, and to provide an opinion on each of these issues.

AIA Owner/Architect and Owner/General Contract Forms - Beware of Arbitration Glitch

Alan E. Tannenbaum — Tue, 30 Dec 2008 18:26:28 -0500

AIA contract forms are popular for major community association repair contracts. Unfortunately, the AIA (American Institute of Architects), presumeably to shield architects from liability, long ago created an arbitration glitch in instances where the Owner/Architect and Owner/General Contractor Contract forms are being utilized for a given project. The glitch is that the Owner/Architect form prohibits the architect (absent the architect's agreement) from being joined in an arbitration proceeding between the owner and general contractor.

Where defects in the work are a result of both design and construction flaws, this glitch can create a major dispute resolution headache.

The owner is forced (absent the architect's agreement) to file separate arbitrations against the general contractor and architect. The general contractor in the one arbitration can attempt to deflect responsibility by blaming the design. The architect in the other arbitration can attempt to deflect responsibility by blaming the construction. Not only is this a very expensive proposition, but the worse case scenario is that both arbitration panels buy the defense arguments, with one walking the general contractor while pinning the blame on the design while the other walks the architect pinning the blame on the general contractor.

Word to the wise, if you use both the AIA owner/architect and owner/general contractor forms, insert provisions in each providing for a joint arbitration of all disputes involving both the design and construction teams. This should include sub-designers (engineers) and subcontractors. Better yet, consider scrapping the arbitration clauses entirely. . . More on this in upcoming blogs.

Construction Warranty Rights for Unit Owners in Florida Condominium Conversions

Alan E. Tannenbaum — Tue, 30 Dec 2008 18:18:18 -0500

Unit owners in Florida condominiums converted from preexisting apartment buildings have inferior rights and remedies to recover for construction defects as compared to the rights and remedies available to unit owners in new Florida condominiums. Unit owners in new condominiums have statutory warranty protection under F.S. 718.203 which extends from the developer, general contractor, subcontractor and suppliers and covers to some extent all improvements and systems interior and exterior.

With condominium conversions, there are no statutory warranties extending from the general contractor, subcontractor or suppliers. The developer can opt out of statutory warranties if the developer adequately funds converter reserves per F.S. 718.618. If the developer chooses not to fund reserves or does not fund adequate reserves, a statutory warranty from the converter developer per F.S. 781.618 does extend to the unit owners, however, until recently, it did not cover all improvements.

If your condominium was converted prior to the enactment of amendments to F.S. 718.618 in 2007, assuming your developer opted for extending warranties or chose instead to fund reserves but failed adequately fund them, a statutory warranty extended to the unit owners but covered solely the roof and structural components, fireproofing and fire protection systems and mechanical, electrical and plumbing systems (except those serving only one unit). Although there is a continuing debate as to the scope of the term "structural," arguably the warranty did not cover the exterior building facade (i.e. walls and windows), paving and drainage features and exterior amenities (tennis courts).

For condominiums converted after the 2007 amendments to F.S. 718.618, assuming the choice by the developer not to fund reserves or the failure of the developer to fund adequate reserves, the developer statutory warranty now covers all improvements and building systems.

Proving What Was On Major Rehab Projects

Alan E. Tannenbaum — Tue, 30 Dec 2008 14:43:51 -0500

Every remedial project has the potential of causing damage to building components and personal property. It is typical to charge back the contractor for such damage. Remedial projects requiring work on both the common elements and unit interiors present special challenges in documenting such damage. Balcony slab rehab work on a hi-rise where the slab deterioration extends into the unit is a classic example. In order to complete the job, sliders may have to be removed, carpets or tile pulled up, draperies and window coverings removed and furniture moved. At the end of the job, all this needs to be replaced or reinstalled.

Meticulous pre-job documentation is a key in proving contractor charge backs and fending off owner claims of damage. For a balcony slab rehab project such as is described above, the condition of each involved slab, balcony railing, slider, slider track, floor covering, window covering, wall finish and piece of furniture should be documented by photograph and in writing. The contractor and unit owner should sign off on a pre-job statement of condition.

Sarasota Herald Tribune - Banker Rethinks His Plea of Guilty

Alan E. Tannenbaum — Wed, 17 Dec 2008 15:12:18 -0500

Sarasota Herald Tribune Continuing Media Series: Mortgage Fraud and Victim Rights, comments by Alan E. Tannenbaum, Managing Partner, Levin Tannenbaum.

Sarasota attorney Alan Tannenbaum, who represents more than 100 Coast loan customers, convinced the 11th U.S. Circuit Court of Appeals in December that the borrowers were victims under the federal Crime Victims Rights Act.

Sarasota Herald-Tribune: Court Victory for Borrowers

Alan E. Tannenbaum — Wed, 17 Dec 2008 11:55:55 -0500

Court Victory for Borrowers: At stake is $3 million in restitution

"It was the most favorable decision the victims could have hoped for", Tannenbaum said Friday.

Tannenbaum invoked the Crime Victims' Rights Act on behalf of 104 Coast borrowers.