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“The Ins & Outs of Preparing a Condominium Association Budget,”

“The Ins & Outs of Preparing a Condominium Association Budget,”

  • Posted: Aug 27, 2021
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“The Ins & Outs of Preparing a Condominium Association Budget,”

Karyan San Martano

In many ways, the managing and operating of a condominium association is akin to operating a business. A primary similarity is the importance of careful and accurate financial planning and budget preparation. The board of directors of an association has fiduciary duties to its members. By paying close attention to the legal and technical requirements of condominium association budget preparation, the association can better assure its members of a smooth-running fiscal year ahead.

The legal and technical requirements of condominium association budgets can be found in Chapter 718, Florida Statutes (the “Condominium Act”) and Section 61B-22 of the Florida Administrative Code. An association’s bylaws may also contain certain financial requirements to which a board and/or budget committee should pay attention. Although the statutory and code requirements apply to all condominium associations, there is no one-size-fits-all for budget preparation. The intricacies of the budget will differ based on a number of factors, such as the size of the condominium, ongoing and upcoming projects, various maintenance obligations, etc.

The budget will cover one fiscal year, which typically tracks the calendar year. However, the association’s bylaws may indicate a different twelve-month period as its fiscal year. The important part is knowing when the fiscal year begins so that the board can ensure plenty of time for planning. For example, many associations which have a fiscal year that follows the calendar year begin planning their budget in the summer months in order to have a proposed budget by November. An additional time requirement to be aware of is that any meeting at which the proposed budget will be considered requires 14 days statutory notice.

However, your association bylaws may require a longer notice, such as a 30 days’ notice of a budget meeting. If your bylaws require a longer notice (such as 30 days) rather than the statutory 14 days’ notice, you must follow the bylaw notice requirement. The notice must include the date, time, and location of the budget meeting as well as a copy of the proposed budget. The completed notice must also be posted in a conspicuous location on the property at least 48-hours before the meeting. Although the budget meetings must be opened to all members, the board is generally authorized to adopt the budget without a vote of the owners.

As for what goes in the budget, it is divided into two main sections: an operating budget and a reserves budget. Again, similar to a business, an association’s operating budget displays the costs of the day-to-day operations of the association. This means that this section reflects reoccurring monthly and annual expenses. The operating budget may include, for example, expenses for management fees, recreational facilities rent, insurance, and taxes. There are certain items that must be contained in the budget pursuant to Section 61B-22 of the Florida Administrative Code, such as the beginning and ending dates of the period covered by the budget, all estimated common expenses or expenditures of the association including the categories set forth in Section 718.504(21)(c), Florida Statutes, and other items.

The total assessment for each unit type according to the proportion of ownership should also be included in the operating budget, either on a monthly basis or for the period for which assessments will be due (e.g., if the association collects quarterly assessments). A key point to remember about the operating budget is that the money budgeted is not restricted to the particular purpose specified on the adopted budget. If necessary, the association board may use its business judgment to spend money designated for one purpose for other purposes.

The second section of the association’s budget is the reserves budget. The Condominium Act requires the association to maintain reserve accounts for capital expenditures and deferred maintenance. A capital expenditure is the purchase or replacement of an asset whose useful life is greater than one year. Deferred maintenance is any maintenance that is performed less frequently than a year or results in maintaining the useful life of an asset. This is distinguishable from routine maintenance, which needs to be included in the operating section of the budget.

The Condominium Act also specifies that the reserves must include roof replacement, building painting, and pavement resurfacing, regardless of the amount of the maintenance or replacement cost. The association is also obligated to include any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. Unlike the operating funds which are not restricted to a particular purpose, reserve funds must be used for their intended purpose, unless a majority vote of the members is obtained to use the funds for other purposes. This means that the board cannot use reserve funds designated for one purpose to cover an unexpected expense without an approval vote.

Although as stated above, a board generally has the authority to adopt the budget without a vote of the membership, the Condominium Act does provide the members with two exceptions. First, the members can vote to waive reserves or partially fund reserves. The board can put the reserves question up to a vote if it so chooses. If no vote to waive or partially fund reserves is taken or not enough members vote to do so, the board must adopt the budget with fully funded reserves.

The second time at which a membership’s vote may be taken is if the board adopts an annual budget which requires assessments exceeding 115 percent of the assessment. At least 10 percent of the members must submit a written request for a special meeting of the owners to consider a substitute budget within 60 days after the adoption of the annual budget. A proper meeting notice must be sent out, and a membership meeting will be held. If there is not a quorum present at the meeting, or if the substitute budget is not adopted, the previously adopted annual budget remains in effect.

The ins and outs of preparing a condominium association budget can be complex, and association counsel should be consulted when needed. The board should begin early to assess the current financial picture of the community as well as its long-term financial needs and goals.

To read the original article, please click here.

Karyan San Martano is a member of Becker’s Community Association practice and regularly provides legal counseling to the officers and directors, as well as the property manager, on the operation of condominiums, cooperatives, and homeowners associations. To learn more about Karyan, please click here.

 

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Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

  • Posted: Aug 27, 2021
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Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

by Becker / Lilliana M. Farinas-Sabogal

To ensure the financial well-being of the association, boards and managers should focus on at least four factors in the association: budget, reserves, insurance, and collection practices. This article will take a brief look at each of these, but this is not a finite list. It is recommended that you consult with your association attorney and accounting professionals to ensure you are doing all that you can to address these and any other financial facets of the association in the best way possible for your community.

 

Budgets
Without sufficient funds, the association cannot carry out all the duties it is required to undertake pursuant to the Florida Statutes or its governing documents. The association obtains these funds from its members. Unfortunately, many associations tend to try to keep the budgets as lean as possible to keep the assessments as low as possible. While no one likes to pay high maintenance fees if that can be helped, no one is served well by an association maintaining an artificially low budget to keep the monthly assessments low either.

The budget process should be an honest evaluation of the known and expected expenses the association will have in the coming year, and the ultimately adopted budget should reflect as much. A budget committee can be formed to help the board with the budgeting process. The Florida Condominium Act requires the proposed annual budget of estimated revenues and expenses to be detailed and to show the amounts budgeted by accounts and expense classifications.

Rather than minimizing anticipated expenses in the hopes they won’t be needed after all or creating a budget on an expectation that certain expenses may be negotiated for a lower price in the future, the association should budget on what things are actually expected to cost. Thereafter, if the lower price is negotiated, the budget can be amended downward. Most owners will agree that an amendment to lower the budget is much more palatable than a surprise special assessment because the anticipated expense did not go down as previously hoped.

Properly budgeting the association is the first step in securing the financial well-being of the association.

 

Reserves
The next step in ensuring the financial well-being of the association is to ensure the monies necessary will be available when expensive, but expected, repairs and maintenance are needed. This is the concept of reserve funding. Florida community association law requires associations to establish and collect “reserves” as part of their annual budgets. This means that an association must create a separate budget that will ensure it collects enough money every year so that when the estimated useful life of the component is expired, the association will have saved the amounts necessary to replace the component without the need for a special assessment.

For example, condominium associations are required by law to collect reserve amounts for the roof, building painting, and pavement resurfacing, regardless of the amount of the replacement costs of these and for any item for which replacement or deferred maintenance will exceed $10,000. The monies in these reserve accounts must be used for the purposes they were collected unless the owners vote to approve their use for alternative purposes.

While associations must include full funding of statutory reserve accounts in each year’s budget, the statutes allow the owners to vote to waive full funding of reserves. In such a vote, or in a vote to use reserve monies for other purposes, the statutes require warning language to be printed on the voting documents to advise owners that voting to use reserve money for another purpose or waiving reserves altogether may lead to special assessments in the future.

Reserve funding should be part of the budgeting process. Maintaining proper reserves ensures the association’s ability to handle its expected needs effortlessly by saving for this over time.

 

Insurance
In the case of the association’s financial well-being, two kinds of insurance are important. The most obvious may be the property and/or liability coverage that every association should have to cover damage to property or persons due to casualty or other unanticipated events. This kind of insurance is extremely important because, besides the fact that insurance is required by law or the association’s governing documents, an association can suffer untold damage that could create substantial financial strain on its members if they must pay for the repairs or damages out of pocket because the association did not carry the proper insurance.

In addition, however, it is also very important to remember that among the numerous provisions in the Florida Condominium Act and the Florida Homeowners Association Act, there is a requirement that the association carry fidelity bonding/insurance. For example, Florida Statute §718.111(11)(h) states:

  • The association shall maintain insurance or fidelity bonding of all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time. As used in this paragraph, the term “persons who control or disburse funds of the association” includes, but is not limited to, those individuals authorized to sign checks on behalf of the association, and the president, secretary, and treasurer of the association. The association shall bear the cost of any such bonding.

These fidelity policies help protect the association against the financial loss in cases of defalcation of association funds.

 

Collection Practices
The association should have fair, but effective, collection practices and policies in place. While associations often feel the need to give some owners time to catch up with payments, or delay “sending the file to the attorney” to “help out” the owner, this can create a number of unanticipated problems for the association’s finances. First, an uneven application of “giving an owner time” can lead to potential defenses to legal action by those who were not “given time.” Second, many boards woefully underestimate exactly how long collections and foreclosure processes can take from start to finish.

Prior to the 2021 legislative session, the statutes already required the association give notice to owners far in advance of the association filing a claim of lien and then again waiting a long time before proceeding to filing a complaint for foreclosure of the claim of lien. The 2021 statutory changes have further expanded the timelines. Now, associations must give an owner a 30-day notice before even sending the file to the association attorney for collections. Once the attorney receives the file, it must give the owner 45 days’ notice of the association’s intent to file a claim of lien for delinquent assessments.

Thereafter, if the owner still has not paid the delinquent amounts, another 45-day notice must be sent to the owner advising of the association’s intent to foreclose the lien, prior to filing the complaint to foreclose. All told, a condominium association, for example, would have to wait at least 120 days after it decided to send the file to the attorney for collections before it would be able to even just file a complaint to foreclose a claim of lien for delinquent assessments.

Associations should consult with their legal and accounting professionals to ensure they have and consistently implement a collections policy to rein in delinquencies and send out the appropriate notices to owners as soon as possible to avoid even longer and more drawn-out collections of needed funds.

Again, this is not a finite list of considerations an association should take into account related to the association’s financial well-being. However, these issues do form the base for the association’s economy and should be top of mind for boards and managers.

 

Lilliana Farinas-Sabogal is a Board Certified Specialist in Condominium and Planned Development Law and a shareholder in Becker’s Community Association and Business Litigation practice groups. In addition to her experience assisting community associations with day-to-day management and operation of governing their communities, she advises Boards of Directors, unit owners, and community association managers on how best to resolve their contractual and transactional disputes and issues. To learn more about Lilliana, please click here.

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Got a pest related question for the experts at Hulett Environmental Services? “Hulett is the South Florida pest control experts.”

Got a pest related question for the experts at Hulett Environmental Services? “Hulett is the South Florida pest control experts.”

  • Posted: Aug 17, 2021
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BOARDS ARE NOT POWERLESS WHEN IT COMES TO COVID  By Eric Glazer, Esq.

BOARDS ARE NOT POWERLESS WHEN IT COMES TO COVID By Eric Glazer, Esq.

  • Posted: Aug 17, 2021
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BOARDS ARE NOT POWERLESS WHEN IT COMES TO COVID

By Eric Glazer, Esq.

It’s hard to believe that we have been dealing with COVID for a year and a half now.  It’s harder to believe that it looks like we will be dealing with it for at least another year and a half.  It’s a never ending nightmare with no end in sight apparently.  Who would ever have thought this could happen?

While we are constantly being told about social distancing, wearing masks, getting vaccinated and avoiding gatherings, as many of you know it is extremely difficult to mandate and practice these objectives in a condominium setting.  Now that the State of Emergency has been lifted (obviously too soon) it is even harder, because the Boards of Directors don’t have the emergency powers any longer.

So what do we do now?  Are Boards prohibited from making rules that protect the health, welfare and safety of the community in regards to COVID, simply because the emergency powers statute is no longer in play?  I say HELL NO.

Florida Statute 718.123 (for condominiums) states the following:

The entity or entities responsible for the operation of the common elements, common areas, and recreational facilities may adopt reasonable rules and regulations pertaining to the use of such common elements, common areas, and recreational facilities.

Florida Statute 720.304 (for HOAs) states the following:

The entity or entities responsible for the operation of the common areas and recreational facilities may adopt reasonable rules and regulations pertaining to the use of such common areas and recreational facilities.

In Hidden Harbour Estates, Inc. v. Norman, 309 So.2d 180, 181–82 (Fla. 4th DCA 1975), the court explained the unique character of condominium living which, for the good of the majority, restricts rights residents would otherwise have were they living in a private separate residence:

It appears to us that inherent in the condominium concept is the principle that to promote the health, happiness, and peace of mind of the majority of the unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property. Condominium unit owners comprise a little democratic sub society of necessity more restrictive as it pertains to use of condominium property than may be existent outside the condominium organization.  Neuman v. Grandview At Emerald Hills, Inc., 861 So.2d 494, 497 (Fla.App. 4 Dist.,2003)

 

The statutory test for rules regarding the operation of the common elements of the condominium is reasonableness.  Neuman v. Grandview At Emerald Hills, Inc., 861 So.2d 494, 497 (Fla.App. 4 Dist.,2003)

There is no doubt in my mind that at this point in time, an association may continue to impose rules and regulations regarding the common elements that the association previously had in effect during the State of Emergency. I doubt highly that an arbitrator or judge would say that limitations on the number of people in the pool, elevator, clubhouse or exercise room during this pandemic is an unreasonable rule. I can’t imagine requiring masks in the common areas would be considered an unreasonable rule, especially when the CDC is recommending it. There are obviously other rules that absolutely may be considered reasonable, especially if you’re in a 55 and over community and the population is at great risk.

I’m getting calls from associations who are wondering if they are now powerless to take necessary precautions to avoid the spread of COVID. Again, the answer is you are not powerless and on the contrary, never lost your ability to continue to make reasonable rules to protect your community.

So what do you need to do? Put the proposed rule on an agenda for a properly noticed Board meeting. At the board meeting, make it extremely clear why the rule is being made. Put in on the record and in a resolution or motion that the Board is making this reasonable rule taking into account the health, welfare and safety of the community. Leave no doubt.

And if you’re wrong? I always say that it’s better to be tried by 12, than carried by 6.

 

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Learn Everything about Reserve Funds For Homeowners Associations

Learn Everything about Reserve Funds For Homeowners Associations

  • Posted: Aug 12, 2021
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Although reserve funds are often not mandatory, an ample reserve can play a big role in protecting a community’s long-term financial health.

 

To function as intended, a homeowners’ association (HOA) must rely on assessment revenue from its members.  Most communities calculate assessments, at least in part, based on an annual budget of anticipated expenses.  These typically include the costs involved in performing all of the HOA’s maintenance duties, procuring necessary insurance, and covering overhead, along with any other fixed or reasonably foreseeable outlays.  The resulting gross budget is then divided among the members of the association, and homeowners are assessed accordingly.

When creating an annual budget in this manner, it’s generally a good idea to be as precise, analytical, and transparent as practically possible.  However, a budgeting approach that relies exclusively on predetermined, repeating, line-item expenses doesn’t leave much room for error.  After all, what if an essential common element is unforeseeably damaged—resulting in significant repair or replacement costs—and there’s no money in the budget or insurance to cover the loss?  Or it may be that the association has some legal issues arise and incurs attorney’s fees much higher than could have been reasonably anticipated.  And, of course, some common elements don’t need maintenance every year, but, when maintenance time comes, it’s costly.

Rather than get caught scrambling for cash when an unexpected contingency or major maintenance need arises, many communities maintain “reserve accounts” or “reserve funds,” as a sort of back-up savings slated for emergencies, long-term upkeep costs, and irregular expenditures. Although reserve funds are often not mandatory, an ample reserve can play a big role in protecting a community’s long-term financial health.

 

What are Reserve Funds?

We’re all familiar with the differences between checking and savings accounts.  Aside from cash itself, a checking account is as liquid as assets get.  You use it to pay bills, buy groceries—the sort of everyday expenditures it takes to run a household.  A savings account, on the other hand, serves as a rainy-day fund you can tap when something unexpected arises—like, say, your vehicle needs a new catalytic converter.

Most homeowners’ associations have an operating account or similarly designated checking account to cover the routine expenses.  Office supplies and regular maintenance of common elements, for instance, are typically paid from the operating fund.

An HOA’s reserve fund, in contrast, is an account dedicated to unanticipated and deferred expenditures, particularly large ones.  The association allocates money toward its reserve account over time so that, when a costly repair or comparable outlay becomes necessary, cash reserves are available to handle the expense without sacrificing day-to-day functions.

By way of example, an HOA might pay out the costs of routine snow removal from its operating account.  If the community expects to need plowing a few times each winter, the board will build the costs into the annual budget.  But when all the plowing over the years leaves a significant portion of the development’s roads in need of repaving, the money is more likely to come from a reserve fund.

Reserve requirements are not addressed under every state’s HOA laws.  And some states that do address them, leave a lot to the board’s discretion.  More commonly, reserve account standards are found in a community’s declaration or bylaws.  Statutes governing condominiums are usually more explicit in setting forth precisely what is required of an association with regard to reserves.

 

The Purpose of Reserve Funds

An association’s annual budget takes into account reasonably foreseeable expenses like landscaping, equipment upkeep, and payroll if the HOA has employees.  But when an association-owned building needs a new roof, the community pool requires a major repair, or all the equipment in the fitness center starts breaking down, the unbudgeted costs will need to be paid from reserves.

A reserve fund can also be used to cover expenses that are not necessarily unforeseen, but arise infrequently enough that it wouldn’t make sense to include them within annual budgets.  If the community’s tennis courts need to be resurfaced every ten years, the board might hold back in reserve around ten percent of the cost each year so that, when the time comes, the resurfacing costs can be paid outright.  Of course, it’s not always so easy to predict precisely how much money will be needed.

 

Boards and Reserve Accounts

For the most part, deciding just how much cash a community needs to hold in reserve is the responsibility of an association’s board.  Under state HOA and condominium statutes, board members owe a “fiduciary duty” to the association. See, e.g., Fla. Stat. §§720.303(1), 718.111(1); 765 ILCS 605/18.4.  The obligations of a fiduciary are among the highest recognized by the law.  In carrying out their responsibilities, a board and its members must act in good-faith, prudently and loyally, and always in furtherance of the association’s best interests.  Id.

“Board members must avoid conflicts of interest when budgeting and allocating reserves.”

The duty of good-faith loyalty includes not wasting or misappropriating an association’s money, including reserves.  HOA funds should only be used for their intended purposes and in the best interests of the community.  Anything less potentially breaches the board’s fiduciary obligation.  Condo associations in Florida, for instance, can only expend reserve funds for authorized reserve expenditures or if a specific outlay is approved in advance by majority vote of the association.  Fla. Stat. §718.112(2)(f)(3).

In furtherance of their fiduciary duties, board members must avoid conflicts of interest when budgeting and allocating reserves.  If a board member, family member, or related business could potentially bid on or otherwise benefit from an association contract, that board member should recuse him or herself from any discussion or voting related to that contract.  See, Tex. Prop. Code § 209.0052.

The duty of prudence means taking reasonable steps to avoid a scenario where a cash-strapped HOA is unprepared for a major expense it should have seen coming.  This means budgeting realistically and ensuring the association has sufficient reserves.  Deciding what is “sufficient,” though, can be difficult because, by definition, reserves pay for expenses that are irregular and not reasonably foreseeable.  Even a board making a good-faith effort to act prudently might not recognize all potential expenses a reserve fund needs to cover.

When setting reserve requirements, the key questions board members need to ask are (1) what unbudgeted expenses are likely to arise over an extended timeline; (2) how much are those expenses likely to cost; and (3) how much additional savings will that necessitate per year.   Most board members are volunteers just trying to help keep their communities running on all cylinders, so it’s probably unrealistic to expect them to know the answers without some professional assistance—especially in large communities with substantial common elements.  Fortunately, though, there are accounting professionals who specialize in “reserve studies” designed to calculate the cash-reserve needs of HOAs and similarly situated organizations.

 

Reserve Studies for Homeowners’ Associations

Reserve funds present something of a conundrum for HOA boards.  If you maintain reserves for the express purpose of paying expenses that are unanticipated and infrequent, then how does the board decide how much it needs to hold in reserve?  If the association holds back too much, it is essentially over-taxing its members.  But if reserves are inadequate, then the HOA might find itself insufficiently liquid to meet its obligations without imposing a costly special assessment or taking out a loan—neither of which is likely to be popular with homeowners.

Reserve studies are intended to help Goldilocks (i.e., the HOA board) find the porridge (i.e., the reserve amount) that’s just right.  A reserve study is an examination conducted by a consultant or accounting firm for the purpose of analyzing probable long-term expenses.  The idea is to use the analysis to estimate the community’s reserve needs as scientifically as possible.

Along with reviewing the association’s assets (including current reserves), budget, and anticipated revenue, the auditor will survey community equipment, buildings, and other common elements.  Based on all available information, the auditor comes up with a long-term schedule of expected repairs, replacements, major maintenance, and any other relevant liabilities likely to affect the HOA’s bottom line.

Once the study is concluded, the board uses the estimates to calculate the level of regular homeowner assessments needed to maintain the optimal reserve account balance.  For instance, if the study estimates that a parking lot within the community will need new asphalt in ten years, and that the cost will be around $20,000, the board might adjust the budget and assessments to hold back $2,000 in additional reserves each year.  That additional $2,000 is divided among all members’ annual dues so that, when the time comes for new asphalt, the funds are already available in the reserve account.

Of course, a study will in all likelihood identify numerous potential expenditures over the relevant period, and the reserve recommendation will be based on the aggregate anticipated long-term cash needs—not just any single item.  But the principle is still the same.

Reserve studies cost money, so they don’t make sense in every situation.  In a small association with only minimal commons and simple maintenance duties, a reserve study would probably cost more than the value it could reasonably be expected to provide.  At the same time, a large association with elaborate commons and extensive duties would be imprudent not to use a reserve study or other means of scientifically calculating reserve needs.

 

Reserve Funding Requirements

The appropriate dollar balance for any given community’s reserve fund depends in large part on the size of the association, the nature of the common elements, and the extent of the HOA’s obligations.  Some state HOA and condo laws establish specific reserve requirements, but funding needs are more commonly set by the board in accordance with standards detailed in the association’s governing documents.  A reserve account is “fully funded” if it covers 100% of the community’s reasonably foreseeable expenses.  Many communities choose to set reserve requirements at a percentage of anticipated expenses, as estimated by the board or identified in a reserve study.  So, for example, an association might require the board to hold in reserve at least 75% of anticipated expenses at any given time, adjusted based on the schedule for deferred maintenance.

A few states establish specific funding requirements for reserves stated as a percentage of the association’s overall budget.  See, e.g., Ohio Rev. Code §5311.081(A)(1) (requiring annual reserve contributions of at least 10% of budget, but allowing waiver by majority vote).  More commonly, states adopt statutory principles for reserves but leave the specifics to the discretion of the board or community as a whole.  Generally, condo laws go into much more detail when it comes to reserve requirements.

Florida’s condo statute requires an association’s annual budget to include reserves for “capital expenditures and deferred maintenance … [including but not limited to] roof replacement, building painting, and pavement resurfacing,” and any other deferred maintenance or replacement cost exceeding $10,000.  Fla. Stat. §718.112(f)2a.  For each included item, the calculation must be based on the “estimated remaining useful life and estimated replacement cost or deferred maintenance expense.”  Id.

Though Florida’s condo statute requires reserves by default, it also allows a condo association to waive reserve requirements, or require a lesser amount, by majority vote.  Id.  Florida’s HOA statute likewise makes reserves optional.  If a community opts for reserves, the reserve account funding must be calculated based on each asset’s estimated deferred maintenance or replacement cost divided by its predicted useful life remaining.  Fla. Stat. §720.303(6)(g).

California requires associations to maintain reserve balances based on reserve studies conducted at least once every three years and including diligent, on-site inspections.  Civil Code §5550.   The study must, at a minimum, identify all major components the HOA is obligated to maintain, the estimated costs and useful life associated with each, and the annual reserve contribution necessary to defray the costs.  Id.

Similarly, Washington requires calculation of reserve contributions in communities with “significant assets” (defined as assets valued at 50% or more of the association’s gross budget) based on regular reserve studies.  Wash. Code §64.34.020.  At least every three years, the study must be conducted by an independent professional who visually inspects the relevant assets.  Notably, though, the Washington statute merely “encourage[s]” HOAs “to establish a reserve account… to fund major maintenance, repair, and replacement of common elements.”  Wash. Code §64.34.380.

State legislation routinely recognizes the importance of reserve funds to homeowners’ associations but doesn’t make them mandatory. However, deferred maintenance, repair and replacement of major elements, and surprise expenses will inevitably come up.  When adequate reserves aren’t available, a community will need to employ alternate means of paying for these significant costs.

 

Alternatives to Reserve Funds

Boards often face a temptation to underfund reserves—or even dip into reserves to pay for what would normally be regular operating expenses—to cover increasing operating costs without raising assessments.  Homeowners often object to additional assessments or reject them altogether.  But paying a little extra up front to make sure sufficient cash-flow is available for adequate reserves can actually save money over time.  And, the alternatives—special assessments, loans, and putting off repairs and replacements—are not particularly attractive options.

“The duty of prudence means taking reasonable steps to avoid a scenario where a cash-strapped HOA is unprepared for a major expense it should have seen coming.”

With a special assessment, the community is paying all-at-once what it could have paid over time.  In effect, current owners are footing the bill for costs that were rightfully the responsibility of prior owners.  And, of course, special assessments often require member approval.  A rejected special assessment is just as helpful to a board facing a major expense as an unfunded reserve account.

If an HOA can’t cover unexpected expenses and long-term maintenance directly from member assessments, there’s also the option of taking out a loan in the name of the HOA.  Obtaining a loan probably won’t be too difficult for an association with regular revenue and relatively little debt, but it may require the use of community assets as collateral.  And, just as significantly, loans require interest.

Even assuming the HOA can secure a loan with a competitive interest rate, the cost of repaying the loan still ultimately comes from assessments, but members end up paying a lot more than the actual expense cost due to interest and transaction costs.  By contrast, an adequately funded reserve account itself earns interest, leading to the opposite result—members pay less out of pocket because money applied to reserves is earning interest up until the expenses become necessary.

And there’s also the option of simply not paying for maintenance, repairs, and replacements that aren’t included in the annual budget.  In this scenario, homeowners lose access to benefits of the community.  If the pool needs an overhaul, but there’s no money to pay for it, members and their families no longer have a neighborhood pool to swim in.  Not to mention, property values may decrease, as the allure of living in a community with a pool is reduced when the pool is inaccessible.

Kicking the can down the road by underfunding reserves almost always leads to losses in the end.  With this in mind, Florida’s HOA statute requires associations without reserves to notify members annually that no reserves are held and that special assessments may be enacted to pay for capital expenditures and deferred maintenance.  Fla. Stat. §720.303(6)(c).

Inadequate funding can lead to safety concerns as well.  Association-owned equipment or facilities that are not receiving scheduled maintenance due to insufficient reserve funding can increase the risk of injury and create unnecessary liability exposure.

Under the right circumstances, insurance coverage can help defray some of the costs caused by underfunded reserves.  Many states mandate that HOAs carry insurance coverage.  Arizona requires property damage coverage for at least 80% of the value of common elements and liability insurance with coverage limits decided by the board.  A.R.S. §33-1253A(1) – (2).   Eight states (Alaska, Colorado, Connecticut, Delaware, Minnesota, Nevada, Vermont, and West Virginia) have adopted the Uniform Common Interest Ownership Act (“UCIOA”), which has requirements similar to Arizona’s, along with mandatory fidelity insurance.  See, e.g., Conn. Gen. Stat. §47-255.

Insurance, though, isn’t foolproof.  A policy won’t cover every major expense that comes up.  A property policy might cover losses due to accident but not if damage results from inadequate maintenance.  A major expense like a new roof might be needed as a result or ordinary wear and tear that a regular property damage policy excludes from coverage.

And for insurance to help, you have to actually procure a policy.  State condo association laws often require insurance, but it’s frequently optional for HOAs.  Even in states that ostensibly require insurance like Arizona and the eight UCIOA states, there’s a limitation—a policy must be obtained “to the extent reasonably available.”  Id.

HOA insurance is generally a good thing to have; it’s just not a foolproof substitute for reserves.  Ideally, it’s more of a supplement, avoiding a scenario in which a catastrophe like a fire or major storm completely saps a community’s reserve funds or forces the association to write off common elements that were once valuable community resources.

Reserve Disclosure Requirements

Most state HOA laws require associations to make regular budgetary disclosures to members, usually including the status of reserve funding.  Florida HOAs, for instance, must prepare yearly budgets estimating anticipated expenses and revenue and identifying any reserve accounts or funds set aside for deferred expenditures.  Fla. Stat. §702.303(6)

In Washington, the statutorily mandated annual budget report must state amounts currently held in reserve, estimate year-end reserve balances, propose a plan for funding reserves, and project future reserve balances if the plan is adopted.  Wash. Code. §64.38.025.  Colorado requires a similar disclosure of present reserve balances, along with the board’s proposal to ensure the community’s reserve needs are adequately funded.  Col. Rev. Stat. §38-33.3-209.5.

California requires a detailed reserve report based on the most recent reserve study, including the remaining useful life of each major component, estimated repair or replacement costs, and the amount of reserve money held by the HOA.  Civil Code §5565.  California HOA members also have a right to notice of “the mechanism or mechanisms by which the board of directors will fund reserves … including assessments, borrowing, use of other assets, deferral of selected replacements or repairs, or alternative mechanism.”  Civil Code §5300.

Particularly in condo associations, prospective purchasers often have a right to receive notice of current reserve balances.  Tex. Prop. Code § 82.157; A.R.S. §33-1260.  Absent an affirmative disclosure requirement, homeowners have a right to request inspection of association records.  See, e.g., Fla. Code §720.303(4).  Records subject to an inspection typically include financial records and budgets.

 

Homeowner Recourse

A homeowner who believes an association’s board is mishandling or underfunding reserves has a few options.  First, the homeowner can bring up reserve issues at the next homeowners’ or open board meeting, or informally discuss concerns with a board member.  A formal records request can also help provide detailed information about how reserves are being maintained and used and whether there is in fact a problem.

Because of the democratic character of community associations, there’s also the option of running for the board in the next election or organizing a campaign to amend the association’s declaration to include more stringent or specific reserve requirements. If misconduct or fiduciary lapses are involved, an individual homeowner or group of homeowners usually have standing to pursue legal claims against the board or its members, depending upon the specifics of the situation and whether actual damages have been incurred.  It’s almost always a good idea to consult with an experienced attorney before asserting or pursuing legal claims.

In situations involving outright fraud or embezzlement, homeowners should bring the matter to the attention of local law enforcement agencies.  Misappropriation of funds entrusted to an individual is criminal conduct in every state, though, of course, the precise standards vary by jurisdiction.

 

 

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EVERYONE IS AN EXPERT  By Eric Glazer, Esq.

EVERYONE IS AN EXPERT By Eric Glazer, Esq.

  • Posted: Aug 12, 2021
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EVERYONE IS AN EXPERT

By Eric Glazer, Esq.

 

I agree that a “reserve study” should be done by an accredited firm following the industry standard guidelines. We have used both Association Reserves and Reserve Advisors. The fact remains that both these and most other competent firms are in fact comprised of engineers and architects.

There is an larger issue in this: In a majority of cases, board members are qualified in NOTHING: Not in construction, not in finance, not in personnel management, etc. Which is why they should use a management company. And even so, how can they possibly assess the value of an opinion issued to them by a construction expert, a financial advisor etc…
Being a board member is a huge responsibility, and I always thought they should be qualified or certified before being admitted in a board.

 

Imagine a world where accountants can examine your heart and give you an opinion regarding its condition and your life expectancy.  Suppose an auto mechanic can examine your kidneys and liver and give his opinion on whether or not they are healthy.  Perhaps one day you can walk into my office and one of the attorneys here can take your blood and talk to you about your blood pressure, sugar and cholesterol.  If this all sounds crazy, it should.  This is exactly how the health of our buildings are determined.  Not by qualified experts like architects, engineers and general contractors, but by former cab drivers, teachers, nurses and the like.  Now these people may be the absolute best in their trained professions, but they certainly are not qualified to make a determination of the condition of the condominium property and the life expectancy of things like the roof, structure and electrical systems. Yet, this is what is going on in Florida as we speak.

For about a two year period of time, condominiums were required to have a reserve study performed by an architect or engineer.  But in 2010 Governor Charlie Crist signed a bill which repealed that requirement.  So since then, the reserve study analysis can be performed by the butcher, baker and candle stick maker.

We all know that the analysis is a joke.  If a new Board comes in that wants to save money and decrease assessments, suddenly the roof has a greater life expectancy than before.  Somehow, like fine wine, the roof got better with age.  It’s a miracle!

The current law is dangerous on so many levels.  It’s so obvious that it would be insulting to all of you to even have to explain further.

Next legislative session I urge all of you to contact your legislators and demand that Florida Statute 718 be amended to again require that reserve studies be performed by an architect or engineer.  Unless your Board has an architect or engineer serving, the Board is simply not qualified to do the analysis.

 

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Issues to Consider Prior to Installing Security Cameras on the Common Areas – Part I

Issues to Consider Prior to Installing Security Cameras on the Common Areas – Part I

  • Posted: Aug 12, 2021
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Issues to Consider Prior to Installing Security Cameras on the Common Areas – Part I

BY 

 

Many associations now install security cameras on the common areas to guarantee video evidence of any intentional vandalism or negligent actions which result in damage to the common areas, such as a vehicle running into the gate of a gated community. Some association want to install  security cameras as a way of deterring criminal acts or violations of the governing documents.

Florida law does not prohibit video surveillance of the common areas. However, both State and Federal laws prohibit audio cameras in certain circumstances.

Florida law makes it illegal to intentionally intercept oral communications through the use of a device if one does not have the prior consent of all parties. This is commonly referred to as wiretapping.  Florida’s wiretapping law is a “two-party consent” law which makes it a crime to intercept or record a “wire, oral, or electronic communication” unless all parties to the communication consent.

However, there is an exception for in-person communications when the parties do not have a reasonable expectation of privacy in the conversation, such as when they are engaged in conversation in a public place where they might reasonably be overheard.  Arguably, this exception applies to the security cameras installed on the common areas. However, the best and safest approach would be to only install security cameras with video and without audio.

Further, while video security cameras are not prohibited, such video security cameras should be pointed in the direction of the common areas and should avoid individual units or lots. Section 810.14, Florida Statutes, prohibits anyone from looking into a person’s house, structure, or conveyance or from looking at a person’s intimate areas that are protected by clothing from the public view. This is referred to a video voyeurism and is a criminal offense. Florida’s Video Voyeurism law is not violated if the video camera is

  1. recording the non-private common areas,
  2. not recording inside any dwelling/unit or even a motor vehicle, and
  3. not recording in portions of the common areas where a person has a reasonable expectation of privacy or might be expected to be in a state of undress (bathrooms, locker rooms, etc.).

 

Elizabeth “Beth” A. Lanham-Patrie

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NEW CDC ORDER – THE CHAOS NEVER ENDS.

NEW CDC ORDER – THE CHAOS NEVER ENDS.

  • Posted: Aug 09, 2021
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NEW CDC ORDER – THE CHAOS NEVER ENDS.

NEW CDC ORDER – THE CHAOS NEVER ENDS. Billions of dollars hung up and not being distributed. This could be fixed so easily. So few tenants are indeed delinquent but most of those that are have been scamming the system for months. Why bother having 3 Branches of government anymore? The Supreme Court ruled on this and now is completely being ignored.

 

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Make Your Waterbody A Focal Point by SOLitude

Make Your Waterbody A Focal Point by SOLitude

  • Posted: Jul 29, 2021
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Make Your Waterbody A Focal Point

Create a functional, beautiful pond your community can enjoy with four strategies that will surely impress local community members.

 

Without proper management, community ponds can develop invasive aquatic weeds, algal blooms, and foul odors, quickly becoming an eye-sore to residents…  Lakes and ponds offer a multitude of opportunities for recreation, fishing, sightseeing, and overall enjoyment of nature. Take advantage of your aquatic resource! Discover the four steps you can implement to create a beautiful, healthy waterbody that community members can appreciate.

 

How To Make Your Waterbody A Focal Point In Your Community

Written by: Greg Blackham, Aquatic Specialist

Many homeowners live on a lake or in a community association with several ponds and stormwater facilities. Without proper management, you may find these waterbodies covered in aquatic weeds and algae, or they could simply look like an uninspired waste of space. No matter the condition of your waterbody, one thing is for certain – it should be so much more!

Lakes and ponds provide a multitude of opportunities for recreation, sightseeing, and overall enjoyment of nature, so it can be sad for aquatic specialists when we see this potential go untapped. Luckily, it is never too late to cultivate a stellar focal point in your community. A professional can get you on the right track with innovative modifications and informed management techniques.

Introduce Floating Fountains

Introduce Floating Fountains

One of the first enhancements we recommend for both visual and functional enhancements is a floating fountain. There are two main fountain types: A decorative fountain is designed to spray water into the air in eye-catching spray patterns, though they are generally not relied on for water circulation. Many have brightly-colored (and customizable) lights that draw attention to the waterbody at night. An aerating fountain, on the other hand, is one that is designed primarily for functional purposes, but that doesn’t mean these devices aren’t aesthetically pleasing too. Some of the best-looking aerating fountains combine decorative vertical spray with lower tiers that provide horizontal spray dispersion to effectively circulate the water column below.

Aeration can have many compound benefits when fountain systems are professionally sized and spaced in the waterbody, and in certain instances, it may be beneficial to pair fountains with submersed aeration systems and oxygen saturation technologies. Water movement helps increase dissolved oxygen levels, which in turn helps stabilize pH and inhibits the nutrient pollution that contributes to aquatic weed, nuisance algae, and toxic cyanobacteria growth. Well-circulated and oxygenated water also help prevent mosquito reproduction while supporting healthy zooplankton – small aquatic animals that feed on algae and serve as food for fish and all types of wildlife.

Plant Beneficial Vegetation

Planting beneficial vegetation is a second improvement that should be considered. But before planting anything in or around the water it’s necessary to remove all the noxious and invasive vegetation first, such as cattails, Phragmites (common reed), and purple loosestrife. This helps reduce the risk of collateral damage to newly planted vegetation. It’s best to work with a professional to identify nuisance species and design a removal program, which can vary widely from species to species and might include hand-pulling, burning, or even herbicide applications by drone!

Decorative plants can be used in so many ways to enhance your waterbody. A well-vegetated buffer zone should include a variety of native wildflowers, grasses, and even shrubs that provide a beautiful frame or border around the water. Sometimes, just the contrast alone can make all the difference. There are many other creative ways to plant for color and vibrancy, and a professional lake manager can help assist in the strategic design. In addition to creating a beautiful backdrop, deep-rooted, flowering species can help filter trash and pollutants, protect the shoreline from erosion, and create a sanctuary for wildlife.

Beneficial aquatic plants should also be installed along with the shallow areas of the waterbody for added benefits like serving as a source of oxygen, balancing predator-prey relationships, and filtering nutrients from the water column so they cannot fuel undesirable weeds and algae. One creative installation method could be a floating island of plants and flowers. Floating islands are designed to add color on top and create beneficial bacterial col

Restore Depth and volume

Restore Depth And Volume

Another great solution for the almost immediate improvement of a lake or pond is the mechanical removal of polluted sediment, muck, and organic matter from the water. This may be accomplished by a full-on dredging project or through spot treatments via hydro-rake, which is essentially a floating barge equipped with a backhoe that scoops sediment onto the shoreline for disposal.

Shortly after the disturbance has settled there is a significant improvement to water clarity and reduction in bad odors that may exist. More importantly, storage capacity increases. This is crucial for a well-functioning stormwater system that does not flood.

Final touches and consistent maintenance

Final Touches And Consistent Maintenance

There are many other improvements that can enhance the beauty of a waterbody without sacrificing functionality. The environmentally friendly blue and black dyes can change the color to a more desirable look, while also reducing available light for weeds and algae. Strategic birdhouses placed around a pond can help reduce midge and mosquito populations in the area while also adding a colorful dynamic to the ecosystem. Even installing a gazebo, a dock, or a small beach area can help break up the landscape and provide more ways for people to engage and interact with their amenities through fishing, kayaking, and birdwatching. Oftentimes, this extra community engagement can spark even larger momentum for creating a truly beautiful and immersive focal point, cherished by everyone that lives there!

Once these efforts have been implemented, they are best maintained through an annual management program, which prioritizes the three central pillars of health, beauty, and functionality. Long-term programs ensure a professional can keep an eye on the multitude of factors that support the ecological balance of the ecosystem, as well as the aesthetic components. Your local aquatic professional can help you design a plan that’s customized to your unique waterbody.

View the Original Website SOLitude blog post.

 

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2021 Legislative Update

2021 Legislative Update

  • Posted: Jul 20, 2021
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2021 Legislative Update

 

TABLE OF CONTENTS

To find the information relevant to your association click the appropriate title.  If it is not clickable for you, simply scroll down.  

Following are laws applicable to:

I. Condominium, Cooperative and Homeowners’ Associations

II. Condominium and Cooperative Associations

III. Condominium Associations

IV. Cooperative Associations

V. Homeowners’ Associations

VI. Other Bills of Interest

 

I. Condominium, Cooperative and Homeowners’ Associations

 

1) Senate Bill 602, effective May 7, 2021, provides additional clarification for already existing laws in Chapter 617, Fla. Stat., known as the Florida Not For Profit Corporation Act.

a)  §617.0725, Fla. Stat., clarifies that amendments to the articles of incorporation and bylaws of condominium, cooperative, and homeowners associations which effect or impose a quorum or voting requirement greater than the general quorum or amendment vote requirement are not required to be approved by the greater quorum or voting requirement then in effect or proposed to be adopted when voting to lower the threshold.

b) §617.0825, Fla. Stat., adds organizing committees established under §720.405, Fla. Stat. (covenant revitalization), to the existing list of condominium, cooperative, and homeowners associations exceptions to the board committee and advisory committee requirements of §617.0825.

c)  §617.1703, Fla. Stat., further clarifies existing law that in the event of conflict between the Florida Not For Profit Corporation Act and Chapter 718 (condominiums), Chapter 719 (cooperatives), Chapter 720 (homeowners associations), and Chapter 723 (mobile home parks), the provisions of those specific chapters apply over that of the Florida Not For Profit Corporation Act.

 

2) House Bill 463 provides an exemption for certain community associations from the requirements of Chapter 514, Fla. Stat., regulating public swimming pools.

(a) §514.0115, Fla. Stat., provides that “pools serving homeowners associations and other property associations which have no more than 32 units or parcels and are not operating as public lodging establishments are exempt from supervision” under Chapter 514 except for supervision necessary to ensure water quality and compliance with §514.0315 (required safety features), and are subject to §514.05 (denial, suspension, or revocation of permit and administrative fines) and §514.06 (injunctions).

 

II. Condominium and Cooperative Associations

 

1) House Bill 649 provides associations regulated by Chapters 718 and 719, Fla. Stat., certain rights and obligations as related to ad valorem tax assessment challenges.

(a) §194.011, Fla. Stat., pertains to ad valorem tax assessment challenges and is amended as follows:

 i. Confirms the right of associations regulated by Chapters 718 and 719, Fla. Stat., to challenge ad valorem tax assessments.

                    ii. Requires that an association send a notice of its intent to petition the value adjustment board to all owners which notice must include a statement that by not opting out of the petition, the owner agrees that the association represents that owner in any related proceedings without the need for the owner to be named or joined as a party.

                 iii. Perfects the right of the association that has filed a single joint petition to seek judicial review or appeal a decision and continue to represent the owners in any related proceedings. 

         (b) §194.181, Fla. Stat., pertains to any tax assessment challenge and is amended as follows:

 i. In any case brought by the property appraiser relating to a value adjustment board decision on a single joint petition filed by an association, the association is the only required party defendant (meaning, the individual owners are not required to be named as parties).

                      ii. Once the association receives a complaint filed by the property appraiser, it must provide notice to all owners that they may (i) elect to retain their own counsel, (ii) choose not to defend the appeal, or (iii) be represented by the association.

 

III. Condominium Associations

 

1) As to condominium associations, Senate Bill 56 provides the following changes:

(a) §718.111, Fla. Stat., is amended to add “all acknowledgments made pursuant to §718.121(4)(c)” (*see below) to the list of what consti- tutes official records. In short, this refers to an owner’s acknowledgement that the association will change its delivery method for providing invoices for assessments or statements of account. While the owner acknowledgement constitutes a part of the official records, it is not open to unit owner inspection and copying.

(b) §718.116, Fla. Stat., is revised to extend the timing, from 30 days to 45 days, of the statutorily required delinquent assessment notice (a/k/a, the intent to foreclose letter) that must be sent to delinquent owners informing them that a claim of lien has been filed against their property and that that the association will foreclose its lien if it remains unpaid. Thus, this notice must be given at least 45 days before the foreclosure action is filed. Failure to do so will preclude the association from recovery of its attorney fees and costs.

(c) §718.121, Fla. Stat., pertains to the association liens for delinquent assessments and is amended as follows:

i. “If an association sends out an invoice for assessments or a unit’s statement of account described in §718.111 (12)(a)11.b., Fla. Stat., they must be delivered to the unit owner by first-class United States mail or by electronic transmission to the unit owner’s email address maintained in the association’s official records. (§718.111(12)(a)11.b., Fla. Stat., refers to a current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and the amount of each assessment, the amount paid on the account, and the balance due.)

                   ii. “Before changing the method of delivery for an invoice for assessments or the statement of account, the association must deliver a written notice of such change to each unit owner at least 30 days before the association sends the invoice for assessments or the statement of account by the new delivery method. The notice must be sent by first-class United States mail to the unit owner at his or her last address as reflected in the association’s records and, if such address is not the unit address, it must be sent by first-class United States mail to the unit address. Notice is deemed to have been delivered upon mailing. a)*A unit owner must affirmatively ac- knowledge, electronically or in writing, his or her understanding that the association will change its method of delivery of the invoice for assessments or the unit’s statement of account before the association may change the method of delivering an invoice for assessments or the statement of account.”

                  iii. New Notice of Late Assessment: “An association may not require payment of attorney fees related to a past due assessment without first delivering a written notice of late assessment to the unit owner which specifies the amount owed to the association and provides the unit owner an opportunity to pay the amount owed without the assessment of attorney fees. Additional collection action cannot be taken for 30 days from the date of the notice. The notice of late assessment must be sent by first-class United States mail to the unit owner at his or her last address as reflected in the association’s records and, if such address is not the unit address, must also be sent by first-class United States mail to the unit address. Notice is deemed to have been delivered upon mailing.”

A rebuttable presumption that the association mailed a notice in accordance with this new law is established if a board member, officer, or agent of the association, or licensed community association manager provides a sworn affidavit attesting to such mailing. In addition, the notice must substantially follow the required statutory format which is provided in the legislation.

iv. The timing of the statutorily required notice of intent to record a claim of lien (a/k/a, the intent to lien letter) that must be sent to delinquent owners informing the owner that a claim of lien will be filed against their property if the delinquency remains unpaid has been changed from 30 days to 45 days.

 

2) As to condominium associations, Senate Bill 630 provides the following changes:

(a) §627.714, Fla. Stat., addresses residential condominium unit owner coverage and required loss assessment coverage. “If a condominium association’s insurance policy does not provide rights for subrogation against the unit owners in the association, an insurance policy issued to an individual unit owner in the association may not provide rights of subrogation against the condominium association.” “Subrogation” is a right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. This is done in order to recover the amount of the claim paid by the insurance carrier to the insured for the loss. Whether this will cause an increase in insurance premiums is highly debatable, depending upon whom you ask. While only time will tell, it is this author’s personal belief that it will cause an increase in pre- miums because the insurance company responsible for the casualty may not have a manner by which they can recoup their losses from the party that caused the casualty. Additionally, it is important to note that this new “anti-subrogation” law only applies to residential condominiums.

(b) §718.103, Fla. Stat., provides definitions of the terms used in Chapter 718, Fla. Stat., and is amended as follows:

i. The term “multicondominium” is amended from “a real estate development containing two or more condominiums, all of which are operated by the same association,” to “real property containing two or more condominiums, all of which are operated by the same association.”

ii. The term “operation” or “operation of the condominium” is amended to include administration and management of the condominium property “and the association.”

(c) §718.111, Fla. Stat., pertains to official records and is amended as follows:

i. Bids for work to be performed or for meterials, equipment, or services must be maintained by the association “for at least 1 year after receipt of the bid.”

ii. In addition to the association’s bylaws and rules, a renter of a unit is now also entitled to inspect and copy the declaration of condominium.

iii. A condominium association “may not require a member to demonstrate any purpose or state any reason for the inspection” of the official records.

iv. An association managing a condominium with 150 or more units and which does not contain timeshare units is already required to post digital copies of certain official records on its website. As an alternative to posting on the website, the association can make the documents available through an application that can be downloaded on a mobile device (otherwise commonly referred to as an “app”).

v. The legislation clarifies the requirement that amendments to the articles of incorporation or other documents creating the association must be posted to the website or app.

(d) §718.112, Fla. Stat., is amended as follows:

i. A condominium association, through board action, may extinguish a discriminatory restriction as provided in §712.065, Fla. Stat.

ii. Board of director term limits are clarified to provide that “[o]nly board service that occurs on or after July 1, 2018, may be used when calculating a board member’s term limit.”

iii. Notice provisions for annual meetings and other unit owner meetings are now separately provided and allow for posting of such notices on association property in addition to posting such notices on the condominium property.

iv. The second notice of election must be provided not less than 14 days nor more than 34 days before the date of the election.

v. Regarding transfer fees, “the association may not charge a fee in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws. Such fee may not exceed $150 per applicant” (an increase of $50). “For the purpose of calculating the fee, spouses or a parent or parents and any dependent children are considered one applicant. However, if the lease or sublease is a renewal of the lease or sublease with the same lessee or sublessee, a charge may not be made.” Such fees may be adjusted every five years in an amount equal to the total of the annual increases occurring in certain consumer indexes, with the Department of Business and Professional Regulation (the “Department”) periodically calculating the fee rounded to the nearest dollar and published on its website.

vi. Director recall challenges by the unit owner representative or by a recalled director may be made by filing a court action in addition to filing a petition for arbitration with the Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division”).

vii. A new provision for “alternative dispute resolution” is mandated to be provided in §718.1255, Fla. Stat., for any residential condominium (discussed below).

viii. A provision which prohibited a non-timeshare condominium association (a/k/a, a residential or commercial condominium association) from employing or contracting with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer is removed.

(e) §718.113, Fla. Stat., is amended as follows to add “natural gas fuel” vehicles to the provisions regarding electric vehicles:

i. The rights granted to those needing to charge electric vehicles are now extended to those having natural gas fuel vehicles, including the right to install a natural gas fueling station within the boundaries of the unit owner’s limited common element parking space or exclusively designated parking space and the obligation to pay the cost for the supply and storage of the natural gas fuel.

ii. “The unit owner installing, maintaining, or removing the electric vehicle charging station or natural gas fuel station is responsible for complying with all federal, state, or local laws and regulations applicable to such installation, maintenance, or removal.”

iii. The board of directors “may make available, install, or operate an electric vehicle charging station or a natural gas fuel station upon the common elements or association property and establish the charges or the manner of payments for the unit owners, residents, or guests to use the electric vehicle charging station or natural gas fuel station.” Importantly, this installation, repair, or maintenance of an electric vehicle charging station or natural gas fuel station “does not constitute a material alteration or substantial addition to the common elements or association property.”

(f) §718.117, Fla. Stat., previously provided that a unit owner or lienor may contest a plan of termination by initiating a petition for mandatory non-binding arbitration. Now, such contest must be brought in accordance with §718.1255, Fla. Stat. (further discussed below).

(g) §718.121, Fla. Stat., pertains to liens and is amended as follows:

i. Labor performed on or materials furnished for the installation of a natural gas fuel station, in addition to an electric vehicle charging station, cannot be the basis for the filing of a lien under Part I of Chapter 713, Fla. Stat., against the association, but such a lien may be filed against the unit owner.

ii. The notice of intent to record a claim of lien (a/k/a, the intent to lien letter) which must be provided to the unit owner prior to recording the lien is now deemed “to have been delivered upon mailing.”

(h) §718.1255, Fla. Stat., pertains to alternative dispute resolution and provides for significant changes such that non-binding arbitration for certain matters is no longer mandatory but rather is optional, and instead, the aggrieved party can use the mediation process set out in Chapter 720, Fla. Stat., rather than the aforementioned arbitration process as follows:

i. “Before the institution of court litigation, a party to a “dispute” (defined below), other than an election or recall dispute, must either petition the Division for nonbinding arbitration or initiate pre-suit mediation” in accordance with §720.311, Fla. Stat. Briefly explained, the pre-suit mediation process set out in §720.311, Fla. Stat., requires the aggrieved party to send to the responding party a statutorily required demand to participate in pre-suit mediation providing five mediator options. The responding party must select one of the five mediators within 20 days, and if not, then the aggrieved party may proceed to file their lawsuit and seek attorney’s fees and costs incurred in attempting to obtain mediation. If the responding party does appropriately respond, then mediation must take place within 90 days.

ii. For purposes of using either nonbinding arbitration or pre-suit mediation, a “dispute” refers to any disagreement between two or more parties that involve the following:

a) the authority of the board of directors to require any owner to take action or to not take action involving that owner’s unit or the appurtenances thereto;

b) the authority of the board of directors to alter or add to a common area or element;

c) the failure of a governing body when required by Chapter 718, Fla. Stat., or an association document to (1) properly conduct elections, (2) give adequate notice of meetings or other actions, (3) properly conduct meetings, or (4) allow inspection of books and records; or

d) a plan of termination pursuant to §718.117, Fla. Stat.

iii. The arbitration can be binding upon the parties, meaning not appealable in the local circuit court, if all parties in the arbitration agree to be bound in writing. If not, then within 30 days of conclusion of the arbitration, the arbitrator’s final order can be appealed in the local circuit court. Such appeal is heard de novo, meaning anew.

(i) §718.1265, Fla. Stat., pertains to emergency powers which are now updated to include situations such as COVID-19 and provide for new procedures which are essentially a codification of the procedures used during the COVID-19 pandemic.

i. Emergency powers are clarified and expanded such that they can be employed in response to damage or injury caused by or anticipated in connection with an emergency as defined in §252.34(4), Fla. Stat., for which a state of emergency is declared.

a) As defined in §252.34(4), Fla. Stat., an “emergency” means “any occurrence, or threat thereof, whether natural, technological, or manmade, in war or in peace, which results or may result in substantial injury or harm to the population or substantial damage to or loss of property.”

ii. In addition to being able to conduct board and membership meetings with notice given as practicable, committee meetings and elections may also be noticed in such manner, and all such meetings may be conducted, in whole or in part, by telephone, real-time video conferencing, or similar real-time electronic or video communication.

iii. In addition to implementation of disaster plans, emergency plans can now be implemented before, during, or following the event for which the state of emergency is declared which include, but are not limited to, shutting down or off elevators; electricity; water, sewer, or security systems; or air conditioners.

iv. In addition to making decisions regarding whether the property is available or unavailable for entry and occupancy by unit owners, family members, tenants, guests, agents, or invitees in order to protect the health, safety, or welfare of such persons upon advice of emergency management officials or licensed professionals retained by the board, such advice may also be provided by public health officials and other licensed professionals available to the board. This also includes decisions as to whether any portion of the property can be safely inhabited, accessed, or occupied, subject to certain exclusions, discussed below.

v. The mitigation authority is expanded to include mitigation of injury or contagions, in addition to mitigation of damage, and such authority includes taking action to contract for the removal of debris and to prevent or mitigate the spread of fungus or contagion.

vi. Contracting on behalf of any unit owner or owners for items or services for which the owners are otherwise individually responsible but which are necessary to prevent further damage to the condominium property or association property is expanded to include prevention of injury and contagion. In addition to drying out of units, replacing damaged air conditioners and air handlers to provide climate control, etc., specifically referenced is sanitizing of the condominium property or association property, as applicable.

vii.  Notwithstanding the power of the board to prohibit access to the property, “an association may not prohibit unit owners, tenants, guests, agents, or invitees of a unit owner from accessing the unit, the common elements, and the limited common elements appurte- nant to the unit for the purpose of ingress to and egress from the unit and when necessary in connection with the sale, lease, or other transfer of a unit” or “with the habitability of the unit or for the health and safety of such person, unless a governmental order or determination, or a public health directive from the Centers for Disease Control and Prevention, has been issued prohibiting such access to the unit. Any such access is subject to reasonable restrictions adopted by the association.” 

(j) §718.202, Fla. Stat., pertains to sales or reservations deposits prior to closing and is amended as follows:

i. Currently, so long as proper disclosures are provided, a developer may withdraw escrow funds in excess of 10 percent of the purchase price. The use of such funds is limited, as revised, to payment of “actual costs incurred,” including, but not limited to, expenditures for “demolition, site clearing, permit fees, impact fees, and utility reservation fees, as well as architectural, engineering, and surveying fees that directly relate to the construction and development of the condominium property.”

ii. In addition to existing prohibitions as to what these funds cannot be used for, such as salaries, commissions, and expenses of salespersons and advertising, the use of these funds for marketing or promotional purposes, loan fees and costs, principal and interest on loans, attorneys’ fees, accounting fees, or insurance costs is also prohibited.

(k) §718.303, Fla. Stat., clarifies that fines and use right suspensions are also applicable to tenants in addition to the already included unit owner, licensee, or invitee of the unit owner and that a fine is due five days after notice of the approved fine is provided to the violator.

(l) §718.405, Fla. Stat., is amended to provide that a multicondominium association is not prevented or restricted from “adopting a consolidated or combined declaration of condominium if such declaration complies with §718.104, Fla. Stat. (pertaining to creation of a condominium and contents of a declaration), and does not serve to merge the condominiums or change the legal descriptions of the condominium parcels as set forth in §718.109, Fla. Stat., unless accomplished in accordance with law.” The new provision is intended to clarify existing law and applies to associations existing on July 1, 2021.

(m) §718.501, Fla. Stat., pertains to the authority, responsibility, and duties of the Division and is amended as follows:

i. The Division has expanded jurisdiction to investigate complaints regarding “maintenance” of official records in addition to the existing authority to investigate complaints regarding “access” to official records.

ii. The Division is required to provide, upon request, a list of mediators to any association, unit owner, or other participant in alternative dispute resolution proceedings under §718.1255, Fla. Stat., requesting a copy of the list.

 

3) As to condominium associations, Senate Bill 1966 provides for the following changes to the board member eligibility requirements and budget process:

(a) §718.112, Fla. Stat., pertains to board member eligibility requirements and the budget adoption process and is amended as follows:

i. As to condominium board member eligibility, presently, if a candidate is delinquent in “any monetary obligation,” then the candidate is not eligible to run for the board. This is revised to further limit the delinquency which would render a candidate ineligible to run for the board to a delinquency merely in the payment of any “assessment obligation” in order to be disqualified.

a) For purposes of determining assessment delinquency, “a person is delinquent if the payment is not made by the due date as specifically identified in the declaration of condominium, bylaws, or articles of incorporation. If a due date is not specifically identified in the declaration of condominium, bylaws, or articles of incorporation, the due date is the first day of the assessment period.”

ii. The board is required to adopt the annual budget “at least 14 days prior to the start of the association’s fiscal year. In the event the board fails to adopt the annual budget in a timely fashion a second time, it shall be deemed a minor violation, and the prior year’s budget shall continue in effect until the new budget is adopted.” 

(b) §718.501, Fla. Stat., is amended to provide the Division with the authority to adopt rules regarding the submission of a complaint against an association.

(c) §718.5014, Fla. Stat., is amended to allow the Condominium Ombudsman the ability to relocate his or her principal office, presently required to be located in Leon County, to a place convenient to the offices of the Division.

 

IV. Cooperative Associations

 

1) As to cooperative associations, Senate Bill 56 provides the following changes:

(a) §719.104, Fla. Stat., is amended to add “all acknowledgments made pursuant to s. 719.108(3)(b)3” (*see below) to the list of what constitutes official records. In short, this refers to an owner’s acknowledgement that the association will change its delivery method for providing invoices for assessments or statements of account. While the owner acknowledgement constitutes a part of the official records, it is not open to unit owner inspection and copying.

(b) §719.108, Fla. Stat., pertains to association liens for delinquent assessments and is amended as follows:

i. “If an association sends out an invoice for assessments or a unit’s statement of account described in §719.104(2)(a)9.b., Fla. Stat., they must be delivered to the unit owner by first-class United States mail or by electronic transmission to the unit owner’s email address maintained in the association’s official records.” (§719.104(2)(a)9.b., Fla. Stat., refers to a current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and the amount of each assessment, the amount paid on the account, and the balance due.)

ii. “Before changing the method of delivery for an invoice for assessments or the statement of account, the association must deliver a written notice of such change to each unit owner at least 30 days before the association sends the invoice for assessments or the statement of account by the new delivery method. The notice must be sent by first-class United States mail to the unit owner at his or her last address as reflected in the association’s records and, if such address is not the unit address, it must be sent by first-class United States mail to the unit address. Notice is deemed to have been delivered upon mailing.” “*A unit owner must affirmatively acknowledge, electronically or in writing, his or her understanding that the association will change its method of delivery of the invoice for assessments or the unit’s statement of account before the association may change the method of delivering an invoice for assessments or the statement of account.”

iii. New Notice of Late Assessment: “An association may not require payment of attorney fees related to a past due assessment without first delivering a writ- ten notice of late assessment to the unit owner which specifies the amount owed to the association and provides the unit owner an opportunity to pay the amount owed without the assessment of attorney fees.” Additional collection action cannot be taken for 30 days from the date of the notice. “The notice of late assessment must be sent by first-class United States mail to the unit owner at his or her last address as reflected in the association’s records and, if such address is not the unit address, must also be sent by first-class United States mail to the unit address. Notice is deemed to have been delivered upon mailing.” A rebuttable presumption that the association mailed a notice in accordance with this new law is established if a board member, officer, or agent of the association, or licensed community association manager provides a sworn affidavit attesting to such mailing. In addition, the notice must substantially follow the required statutory format which is provided in the legislation.

iv. Notice of Intent to Lien: The timing of the statutorily required notice of intent to record a claim of lien that must be sent to delinquent owners informing the owner that a claim of lien will be filed against their property if the delinquency remains unpaid has been changed from 30 days to 45 days.

v. Notice of Intent to Foreclose: The timing of the statutorily required delinquent assessment notice that must be sent to delinquent owners informing the owner that a claim of lien has been filed against their property and that the association will foreclose its lien if it remains unpaid has been changed from 30 days to 45 days. Thus, this notice must be given at least 45 days before the foreclosure action is filed. Failure to do so will preclude the association from recovery of its attorney fees and costs.

 

2) As to cooperative associations, Senate Bill 630 provides the following changes:

(a) §719.103, Fla. Stat., which sets forth the definition of the term “unit,” is amended to provide that “[a]n interest in a unit is an interest in real property.” (This small tweak may be very helpful to cooperative shareholders in their attempts to enter into loans for their cooperative units subject to the proprietary lease.)

(b) §719.104, Fla. Stat., with regard to official records, is amended to provide that the cooperative association “may not require a member to demonstrate any purpose or state any reason for the inspection” of the official records.

(c) §719.106, Fla. Stat., pertains to cooperative by-laws and is amended as follows:

i. “A board member or committee member participating in a meeting via telephone, real-time video conferencing, or similar real-time electronic or video communication counts toward a quorum, and such a member may vote as if physically present.”

ii. If the board determines not to certify a recall or fails to certify a recall, then the board must, within five business days, file a petition for arbitration with the Division or file a court action. The unit owners participating in the recall must be named as a party under the petition for arbitration or in a court action. If the arbitrator or court certifies the recall as to any director, the recall is effective upon mailing the final order of arbitration to the association or the final order of the court. If the association fails to comply with the order of the court or the arbitrator, the Division may take action pursuant to §719.501, Fla. Stat.

iii. Director recall challenges by the unit owner representative or by a recalled director may be made by filing a court action in addition to filing a petition with the Division.

iv. A new provision for “alternative dispute resolution” is mandated to be provided in §719.1255, Fla. Stat., for internal disputes arising from the operation of the cooperative.

v. A cooperative association, through board action, may extinguish a discriminatory restriction as provided in §712.065, Fla. Stat.

(d) §719.128, Fla. Stat., pertains to emergency powers which are now updated to include situations such as COVID-19 and provide for new procedures which are essentially a codification of the procedures used during the COVID-19 pandemic.

i. Emergency powers are clarified and expanded such that they can be employed in response to damage or injury caused by or anticipated in connection with an emergency as defined in §252.34(4), Fla. Stat., for which a state of emergency is declared.

a) As defined in §252.34(4), Fla. Stat., an “emergency” means any occurrence, or threat thereof, whether natural, technological, or manmade, in war or in peace, which results or may result in substantial injury or harm to the population or substantial damage to or loss of property.

ii. In addition to being able to conduct board and membership meetings with notice given as practicable, committee meetings and elections may also be noticed in such manner, and all such meetings may be conducted, in whole or in part, by telephone, real-time video conferencing, or similar real-time electronic or video communication. Notice of decisions may also be communicated as provided in this paragraph.

iii. In addition to implementation of disaster plans, emergency plans can now be implemented before, during, or following the event for which the state of emergency is declared which may include, but are not limited to, shutting down or off elevators; electricity; water, sewer, or security systems; or air conditioners.

iv. In addition to making decisions regarding whether the property is available or unavailable for entry and occupancy by unit owners, family members, tenants, guests, agents, or invitees in order to protect the health, safety, or welfare of such persons upon advice of emergency management officials or licensed professionals retained by the board, such advice may also be provided by public health officials and other licensed professionals available to the board. This also includes decisions as to whether any portion of the property can be safely inhabited, accessed, or occupied subject to certain exclusions, discussed below.

v. In addition to requiring evacuation in the event of a mandatory evacuation order, the emergency powers now include the power to prohibit or restrict access to the cooperative property in the event of a public health threat.

vi. The mitigation authority is expanded to include mitigation of injury or contagions, in addition to mitigation of damage, and such authority includes taking action to contract for the removal of debris, to prevent or mitigate the spread of fungus, or to sanitize the cooperative property.

vii. Contracting on behalf of any unit owner or owners for items or services for which the owners are otherwise individually responsible but which are necessary to prevent further damage to the cooperative property is expanded to include prevention of injury and contagion. In addition to drying out of units, replacing damaged air conditioners and air handlers to provide climate control, etc., specifically referenced is sanitizing of the cooperative property.

viii. Notwithstanding the power of the board to prohibit access to the property, “an association may not prohibit unit owners, tenants, guests, agents, or invitees of a unit owner from accessing the unit, the common elements, and the limited common elements appurtenant to the unit for the purpose of ingress to and egress from the unit and when is necessary in connection with the sale, lease, or other transfer of a unit or with the habitability of the unit or for the health and safety of such person, unless a governmental order or determination, or a public health directive from the Centers for Disease Control and Prevention, has been issued prohibiting such access to the unit. Any such access is subject to reasonable restrictions adopted by the association.”

 

3) As to cooperative associations, Senate Bill 1966 provides the following changes to the budget process:

(a) §719.106, Fla. Stat., is amended to provide that the board is required to adopt the annual budget “at least 14 days prior to the start of the association’s fiscal year. In the event the board fails to adopt the annual budget in a timely manner a second time, it shall be deemed a minor violation, and the prior year’s budget shall continue in effect until the new budget is adopted.”

 

V. Homeowners’ Associations

 

1) As to homeowners’ associations, Senate Bill 56 provides the following changes:

(a) §720.303, Fla. Stat., is amended to add “all acknowledgments made pursuant to s. 720.3085(3) (c)3” (*see below) to the list of what constitutes official records. In short, this refers to an owner’s acknowledgement that the association will change its delivery method for providing invoices for assessments or statements of account. While the owner acknowledgement constitutes a part of the official records, it is not open to owner inspection and copying.

(b) §720.3085, Fla. Stat., per- tains to association liens for delinquent assessments and is amended as follows:

i. “If an association sends out an invoice for assessments or a parcel’s statement of account described in §720.303(4)(j)2., Fla. Stat., they must be delivered to the owner by first-class United States mail or by electronic transmission to the owner’s email address maintained in the association’s official records.” (§720.303 (4)(j)2., Fla. Stat., refers to a current account and a periodic statement of the account for each member, designating the name and current address of each member obligated to pay assessments, the due date and amount of each assessment or other charge against the member, the date and amount of each payment on the account, and the balance due.)

ii. Before changing the method of delivery for an invoice for assessments or the statement of account, the association must deliver a written notice of such change to each owner at least 30 days before the association sends the invoice for assessments or the statement of account by the new delivery method “The notice must be sent by first-class United States mail to the owner at his or her last address as reflected in the association’s records and, if such address is not the parcel address, it must be sent by first-class United States mail to the parcel address. Notice is deemed to have been delivered upon mailing.” “*A parcel owner must affirmatively acknowledge, electronically or in writing, his or her understanding that the association will change its method of delivery of the invoice for assessments or the parcel’s statement of account before the association may change the method of delivering an invoice for assessments or the statement of account.”

iii. New Notice of Late Assessment: “An association may not require payment of attorney fees related to a past due assessment without first delivering a written notice of late assessment to the owner which specifies the amount owed to the association and provides the owner an opportunity to pay the amount owed without the assessment of attorney fees.” Additional collection action cannot be taken for 30 days from the date of the notice. “The notice of late assessment must be sent by first-class United States mail to the owner at his or her last address as reflected in the association’s records and, if such address is not the parcel address, must also be sent by first-class United States mail to the parcel address. Notice is deemed to have been delivered upon mailing. A rebuttable presumption that the association mailed a notice in accordance with this new law is established if a board member, officer, or agent of the association, or licensed community association manager provides a sworn affidavit attesting to such mailing.” In addition, the notice must substantially follow the required statutory format which is provided in the legislation.

 

2) As to homeowners associations, Senate Bill 630 provides the following changes:

(a) §720.301(8), Fla. Stat., setting forth the definition of the term “governing documents,” is revised to remove adopted rules and regulations therefrom.

(b) §720.303, Fla. Stat., pertains to board meetings, official records, budgets, financial reports, association funds, and recalls and is amended as follows:

i. “In addition to any of the authorized means of providing notice of a board meeting, the association may, by rule, adopt a procedure for conspicuously posting the meeting notice and agenda on the association’s website or an application (an app) that can be downloaded on a mobile device for at least the minimum period of time for which a meeting notice is also required to be physically posted on the association property. Any rule adopted must, in addition to other matters, include a requirement that the association send electronic notice to members whose email addresses are included in the association’s official records in the same manner as is required for notice of a meeting of the members. Such notice must include a hyperlink to the website or such mobile application on which the meeting notice is posted.”

ii. “Ballots, sign-in sheets, voting proxies, and all other papers and electronic records relating to voting by owners” are added to the list of official records which must be maintained by the association, and they must be maintained for at least one year after the date of the election, vote, or meeting.

iii. Although comprising a part of the association’s official records, “[i]nformation an association obtains in a gated community in connection with guests’ visits to parcel owners or community residents” is added to the list of official records which are not subject to member inspection and copying.

iv. If the budget does not include reserve accounts created in accordance with §720.303(6)(d), Fla. Stat., or the declaration, articles, or bylaws do not obligate the developer to create reserves, and the association is responsible for the repair and maintenance of capital improvements that may result in a special assessment if reserves are not provided or not fully funded, each financial report for the pre- ceding fiscal year must contain a statutorily provided statement warning of such consequence in conspicuous type.

v. While a developer is in control of a homeowners association, the developer may, but is not required to, include reserves in the budget. If the developer includes reserves in the budget, the developer may determine the amount of reserves included.

vi. The developer is not obligated to pay for “contributions to reserve accounts for capital expenditures and deferred maintenance, as well as any other reserves the homeowners association or developer may be required to fund pursuant to any state, municipal, county, or other governmental statute or ordinance.”

vii. The developer is also not obligated to pay for operating expenses. In reading this new provision together with other developer funding obligations, this author interprets this provision to mean that the developer is not obligated to pay for operating expenses beyond its parcel assessment obligations if the developer is paying assessments on its parcels as opposed to deficit funding.

viii. The developer is not obligated to pay for “any other assessments related to the developer’s parcels for any period of time for which the developer has provided in the declaration that in lieu of paying any assessments imposed on any parcel owned by the developer, the developer need only pay the deficit, if any, in any fiscal year of the association, between the total amount of assessments receivable from other members plus any other association income and the lesser of the budget or actual expenses incurred by the association during such fiscal year.”

ix. If the board determines not to certify a recall or fails to certify a recall, then the board must, within five business days, file a petition for arbitration with the Department or file a court action. The owners participating in the recall must be named as a party under the petition for arbitration or in a court action. If the arbitrator or court certifies the recall as to any director, the recall is effective upon mailing the final order of arbitration to the association or the final order of the court.

x. Director recall challenges by the owner representative or by a recalled director may be made by filing a court action in addition to filing a petition under §718.1255, Fla. Stat.

(c) §720.305, Fla. Stat., clarifies that a fine is due five days after notice of the approved fine is provided to the owner and, if applicable, to any occupant, licensee, or invitee of the owner.

(d) §720.306, Fla. Stat., pertains to meetings of members, voting and election procedures, and amendments to the governing documents.

i. “A notice required under this section must be mailed or delivered to the address identified as the owner’s mailing address in the official records of the association as required under §720.303(4), Fla. Stat.”

ii. As to leasing, any governing document, or amendment thereto, that is enacted after July 1, 2021, and that prohibits or regulates rental agreements applies only to (i) an owner who acquires title to a parcel after the effective date of the governing document or amendment, or (ii) an owner who consents, individually or through a representative, to the governing document or amendment.

a) Notwithstanding, an association may amend its governing documents to prohibit or regulate rental agreements for a term of less than six months and may prohibit the rental of a parcel for more than three times in a calendar year, and such amendments shall apply to all owners.

b) For the purposes of these rental amendment restrictions, a change of ownership does not occur when a parcel owner conveys the parcel to an “affiliated entity,” when beneficial ownership of the parcel does not change, or when an heir becomes the owner.

c) An “affiliated entity” means “an entity that controls, is controlled by, or is under common control with, the owner or that becomes a parent or successor entity by reason of transfer, merger, consolidation, public offering, reorganization, dissolution or sale of stock, or transfer of membership partnership interests.”

d) “For a conveyance to be recognized as one made to an affiliated entity, the entity must furnish to the association a document certifying that the exclusion applies and provide any organizational documents for the owner and affiliated entity which support the representations in the certificate, as requested by the association.”

e) For the purposes of these rental amendment restrictions, “a change of ownership does occur when, with respect to an owner that is a business entity, every person that owned an interest in the real property at the time of the enactment of the amend- ment or rule conveys their interest in the real property to an unaffiliated entity.”

f) These rental amendment restrictions do not apply to associations with 15 or fewer owners.

iii. Election and recall disputes between a member and an association must be submitted to either binding arbitration with the Division or filed with a court of competent jurisdiction. (This amendment is also reflected in §720.311, Fla. Stat.)

(e) §720.3075, Fla. Stat., is amended to provide that a homeowners association, through board action, may extinguish a discriminatory restriction as provided in §712.065, Fla. Stat.

(f) §720.316, Fla. Stat., pertains to emergency powers which are now updated to include situations such as COVID-19 and provide for new procedures which are essentially a codification of the procedures used during the COVID-19 pandemic.

i. Emergency powers are clarified and expanded such that they can be employed in response to damage or injury caused by or anticipated in connection with an emergency as defined in §252.34(4), Fla. Stat., for which a state of emergency is declared.

a) As defined in §252.34(4), Fla. Stat., an “emergency” means “any occurrence, or threat thereof, whether natural, technological, or manmade, in war or in peace, which results or may result in substantial injury or harm to the population or substantial damage to or loss of property.”

ii. In addition to being able to conduct board and membership meetings with notice given as practicable, committee meetings and elections may also be noticed in such manner, and all such meetings may be conducted, in whole or in part, by telephone, real-time video conferencing, or similar real-time electronic or video communication. Notice of decisions may also be communicated as provided in this paragraph.

iii. In addition to implementation of disaster plans, emergency plans can now be implemented “before, during, or following the event for which the state of emergency is declared which may include, but are not limited to, shutting down or off elevators; electricity; water, sewer, or security systems; or air conditioners.”

iv. In addition to making decisions regarding whether the property is available or unavailable for entry and occupancy by owners, family members, tenants, guests, agents, or invitees in order to protect the health, safety, or welfare of such persons upon advice of emergency management officials or licensed professionals retained by the board, such advice may also be provided by public health officials and other licensed professionals available to the board. This also includes decisions as to whether any portion of the property can be safely inhabited, accessed, or occupied, subject to certain exclusions, discussed below.

v. The mitigation authority is expanded to include mitigation of injury or contagions, in addition to mitigation of damage, and such authority includes taking action to contract for the removal of debris, to prevent or mitigate the spread of fungus, or to sanitize the common areas or facilities.

vi. Notwithstanding the power of the board to prohibit access to the property, “an association may not prohibit owners, tenants, guests, agents, or invitees of an owner from accessing the common areas and facilities for the purpose of ingress to and egress from the parcel and when necessary in connection with the sale, lease, or other transfer of a parcel or with the habitability of the parcel or for the health and safety of such person, unless a governmental order or determination, or a public health directive from the Centers for Disease Control and Prevention, has been issued prohibiting such access to the parcel. Any such access is subject to reasonable restrictions adopted by the association.”

 

VI. Other Bills of Interest

 

1) Senate Bill 2006 amends various Florida Statutes as relates to emergency management that govern emergency preparations, orders, and disaster recovery as follows:

(a) Prohibits a business entity or a governmental entity from requiring customers to verify COVID-19 vaccination, which includes community associations.

(b) Expands emergency powers for use during public health emergencies.

(c) Provides for legislative oversight and limitations on the duration of executive orders issued by the governor.

(d) Provides for limitations on the duration of emergency orders issued by a political subdivision, including the ability of the governor to invalidate local orders if the governor determines that the order unnecessarily restricts individual rights or liberties.

(e) Provides that an executive order imposing business restrictions or closure of, or restricted in-person attendance at, K-12 public schools must specifically state the reasons for the restrictions or closure.

 

2) House Bill 403 provides restrictions on local government’s ability to regulate home businesses.

(a) §559.995, Fla. Stat., pertaining to home-based businesses and local government restrictions, is added as follows:

i. Local governments may not enact or enforce any ordinance, regulation, or policy or take any action to license or otherwise regulate a home-based business.

ii. A home-based business must meet the following criteria in order to be considered a home-based business:

a) It must operate from residential property.

b) Employees of the business who work at the residential dwelling must also reside there, except that there may be up to two other employees or independent contractors who do not reside at the residential dwelling who may work at the business. In addition, there can be other remote employees that do not work at the residential dwelling.

c) Parking related to the business activity may not be greater in volume than would normally be expected by similar residents where no business is conducted and must comply with local zoning requirements, along with other compliance requirements.

d) As viewed from the street, the use of the residential property must be consistent with the uses of the residential areas that surround the property.

e) The activities of the home-based business must be secondary to the property’s use as a residential dwelling. The business activities must comply with all relevant local and state regulations. There can be no excessive fumes, noxious odors, vibration, noise, etc.

iii. Provides that the application of these new laws does not supersede any current or future declaration adopted pursuant to Chapter 718 (condominiums), Chapter 719 (cooperatives), and Chapter 720 (homeowners associations).

 

3) House Bill 421 & House Bill 1101 (effective 10/1/2021) provide revisions to the Bert J. Harris, Jr., Private Property Rights Protection Act, set out in Chapter 70, Fla. Stat. This Act provides relief to private landowners when a law, regulation, or ordinance inordinately burdens, restricts, or limits private property without amounting to a taking under the U.S. Constitution.

(a) §70.001, Fla. Stat., is amended as follows:

i. Provides that the prior owner maintains their Bert Harris claim so long as they filed their claim while they were the property owner.

ii. Clarifies that the term “real property” includes “surface, subsurface, and mineral estates” in addition to appurtenances and improvements to the land, including any other relevant interest in the real property in which the property owner has a relevant interest. However, the term includes only parcels that are the subject of and directly impacted by the action of a governmental entity.

iii. Allows the property owner the right to forgo a jury trial and to elect that the court determine the award of compensation.

iv. Provides for what amounts to a one-year statute of limitations to bring the claim from the time of the governmental notice which brought about the diminution of value.

 

4) SB 72 was signed into law on March 29, 2021, and, in pertinent part, grants liability protection to businesses and entities from lawsuits related to COVID-19 exposure.

(a) §768.38, Fla. Stat., was created and grants civil liability immunity to business entities and institutions, including, but not limited to, religious institutions and community associations. However, limited liability companies are excluded.

i. To be afforded the immunity, the association (or other business entity) must make a good faith effort to substantially comply with authoritative or controlling federal, state, and local public health standards or guidelines at the time the cause of action accrued. If more than one source or set of standards or guidance was authoritative or controlling at the time, the association’s good faith effort to substantially comply with any one of these sources or sets of standards or guidance will confer immunity from civil liability.

ii. If the court determines the defendant did not make a good faith effort to comply, the plaintiff may proceed with an action against the defendant. To establish liability, the defendant must have acted with gross negligence or intentional conduct, and the foregoing must be proven by clear and convincing evidence (rather than a mere preponderance of the evidence).

iii. There is a shortened one-year statute of limitations within which to bring the claim.

 

5) SB 60 pertains to code enforcement complaints.

(a) §§125.69, 162.06, 162.21, 166.0415, Fla. Stat., were amended to provide that a code inspector or code enforcement officer may not initiate an investigation of a potential violation of a duly enacted code or ordinance by way of an anonymous complaint unless the code inspector or code enforcement officer has reason to believe the violation presents an imminent threat to public health, safety, or welfare or imminent destruction of habitat or sensitive resources.

 

6) SB 76 pertains, in pertinent part, to contractors and provides for prohibition of solicitation.

(a) §489.147, Fla. Stat., pertaining to prohibited solicitations regarding roof damage is added as follows:

i. A contractor may not directly or indirectly engage in any of the following practices:

a) Soliciting a residential property owner by means of a “prohibited advertisement.” The term “prohibited advertisement” means “any written or electronic communication by a contractor that encourages, instructs, or induces a consumer to contact the contractor or public adjuster for the purpose of making an insurance claim for roof damage. The term includes, but is not limited to, door hangers, business cards, magnets, flyers, pamphlets, and emails.”

 b) “Offering to a residential property owner a rebate, gift, gift card, cash, coupon, waiver of any insurance deductible, or any other thing of value in exchange for the following: 1) Allowing the contractor to conduct an inspection of the residential property owner’s roof; or 2) Making an insurance claim for damage to the residential property owner’s roof.

    c) Offering, delivering, receiving, or accepting any compensation, inducement, or reward for the referral of any services for which property insurance proceeds are payable.

        d) Interpreting insurance policy provisions or advising an insured regarding coverage or duties under the insurance property insurance policy.

       e) Providing an insured with an agreement authorizing repairs without providing a good faith estimate of the itemized and detailed cost of services and materials for repairs undertaken pursuant to an insurance claim; however, a contractor is not in violation if the actual cost of repairs differs from the initial estimate.”

ii. A contractor or unlicensed person who violates this section is subject to disciplinary proceedings and may receive up to a $10,000 fine for each violation.

iii. A contractor may not execute a contract with an owner to repair or replace a roof without including a notice that the contractor may not engage in the practices set forth above. If the contractor does not include such notice, the owner may void the contract within 10 days after execution.

 

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Is your community association indemnified from legal action resulting from collection activities? Don’t Get Sued, Get Axela!

Is your community association indemnified from legal action resulting from collection activities? Don’t Get Sued, Get Axela!

  • Posted: Jul 20, 2021
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Don’t Get Sued, Get Axela!

HOAs, Condominium Associations, Cooperatives, and other community associations are regularly adjusting how they do business based on new laws and updates to existing statutes that supersede their own governing documents. Lately, a barrage of new legislation has taken direct aim at how community associations handle the collection of delinquent fees from home and unit owners who have fallen behind on their fees and assessments. Failure to follow these laws can put an association, its management company, and even its attorney in danger of being sued.

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Legal Requirements

Axela Technologies has long been the leader in providing indemnification for HOAs, condominium associations, cooperatives and community association management firms by offering fully compliant third-party debt and delinquency collection services. We pride ourselves on keeping our business practices compliant with your state collection laws and are vigilant on newly passed legislation.

California’s Davis-Stirling Act, for example, outlines the “do’s and don’ts” for associations seeking to collect the fees that are owed to them from delinquent homeowners. Appropriately, each year the legislature has amended, revised and added numerous provisions of the Act. Requiring associations  to be aware of the latest requirements in order for the association to proceed with collection of delinquent assessments.

Now Florida has revised their own laws for collecting delinquent assessments, adding additional protections for homeowners that all condominium associations, HOAs, and association management firms must adhere to on top of all their existing workload.

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New Florida Laws

Among the most important changes in Florida law is Senate Bill 56: Community Association Assessment Notices (“SB 56”). The waiting period before notices can be sent to delinquent home or unit owners has been extended. HOAs already had to wait 45 days before notices that a lien was being sought against the debtor’s property could be sent. Additionally, a similar waiting period is needed for the post-lien notice of intent to foreclose.

Put simply, the new notice requirements will establish a 120-day period of collection efforts that associations must incur before proceeding with a foreclosure action. There will now be a mandatory 30-day courtesy notice of late assessment, a 45-day notice of intent to record a claim of lien, and a 45-day notice of intent to foreclose on that claim of lien. These changes take effect on July 1, 2021.

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The Attorneys’ Function

The largest portion of the remaining legislative changes refer specifically to the work performed by attorneys on behalf of the associations they represent. While attorneys are sometimes needed for filing liens and enforcing the security interests of the associations they represent, it is almost always a far better decision to engage with a third-party debt collection service to properly service both the association and the delinquent home or unit owner prior to getting an attorney involved. Axela complies with all state laws in every state that it services and fully indemnifies the association and assures full compliance with state and federal law as well as the individual association’s own governing documents.

Is your HOA, condominium association, cooperative, or association management firm struggling to keep up with the latest legislation and indemnification while simply trying to collect the money it is owed from delinquent home or unit owners? Even the simplest collection task can come under legal scrutiny. With our “no cost or risk to the association” assurance, engaging Axela Technologies for your delinquency collection needs may be one of the easiest business decisions you’ll make in this litigious environment. Get in touch today and let us show you how we can collect your money without putting your association or association management business at risk of violating the law.

 

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