Comments: Comments Off on Can Remote Meetings Be Held Now That the State of Emergency Has Expired?
Can Remote Meetings Be Held Now That the State of Emergency Has Expired?
The “state of emergency” that had been imposed by Governor DeSantis in light of the COVID-19 pandemic expired on June 26, 2021. As a result, the “emergency powers” given to condominium, cooperatives, and homeowners’ associations in Sections 718.1265, 719.128, and 720.316, Florida Statutes, respectively, are no longer in effect. The emergency powers that were in effect during the COVID-19 state of emergency included conducting board meetings and membership meetings with notice given as is practicable, but did not specifically give associations the authority to conduct meetings remotely. Nevertheless, many associations did hold meetings remotely in an effort to slow the spread of the virus and to protect its residents and employees. (NOTE: The emergency powers statutes were amended effective July 1, 2021, and now specifically provide that during a declared state of emergency, the association may conduct board meetings, committee meetings, elections, and membership meetings, in whole or in part, by telephone, real-time videoconferencing, or similar real-time electronic or video communication.)
Now that the state of emergency has expired, what meetings can associations hold remotely, either in whole or in part?
With regard to board meetings, the statutes specifically address the board members’ participation by telephone or videoconferencing, but do not address whether owners may participate remotely or whether the owners can be required to participate remotely. The statutes do provide that meetings of the board must be “open” to all owners. If your board wishes to hold remote board meetings, the board can allow owners to also participate remotely in the same manner as the board members by giving the owners the call-in number or videoconference link. The law is unsettled as to whether a remote only meeting is valid, as some owners may not have the capability or desire to participate remotely.
With regard to owner meetings, the statute governing corporations not-for-profit, Section 617.0721(3), Florida Statutes, provides that owners and proxyholders may participate remotely and can also vote remotely if authorized by the board of directors, and subject to such guidelines and procedures as the board may adopt. But as with Board meetings, none of the statutes indicate whether “remote only” meetings, which require the owners to participate remotely, are valid. (Note that this type of “remote voting” contemplated by Section 617.0721(3) is different than the electronic/online voting that is permitted by Sections 718.128, 719.129, and 720.317, Florida Statutes).
For owner meetings at which an election will be held, the issue is more difficult. The Condominium and Cooperative Acts require owners to vote by “secret ballot” and many homeowners’ associations governing documents also have a secret ballot requirement. In that case, an owner participating remotely would be unable to vote on the election of directors unless the owner voted in advance of the meeting or unless the association had authorized electronic/online voting pursuant to Sections 718.128, 719.129, and 720.317, Florida Statutes). Further, in condominium and cooperative associations, the “election committee” that opens and counts the election ballots must be physically together, and owners are entitled to observe the ballot counting process in the owners’ “presence”.
Because of these legal issues, a “hybrid” approach where owners are given the option to participate remotely, but are not required to participate remotely, is the best approach. Some meetings lend themselves to remote participate more than others. For instance, board meetings and non-election owners’ meetings are the types of meetings that can be managed remotely. However, if there is an election, there will need to be additional considerations.
Boards should discuss these issues with the association’s attorney so that all of the necessary board authorizations can be prepared and approved by the board.
Comments: Comments Off on 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.
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.
Comments: Comments Off on Learn Everything about Reserve Funds For Homeowners Associations
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.
Comments: Comments Off on New Requirements for Collection of Delinquent Assessments
New Requirements for Collection of Delinquent Assessments
Robert Kaye, Managing member of Kaye Bender Rembaum, recently wrote an informative and telling article explaining the new collection procedures mandated to be in effect July 1, as a result of the 2021 legislation. Every board member, manager, and developer needs to be aware of these important changes.
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The Florida Legislature has revised the procedures for collecting delinquent assessments, which add additional steps and delays for the owner to pay before legal action can commence and/or attorney’s fees can be recovered. Senate Bill 56 has revised Sections 718.116 and 718.121 for condominiums; 719.108 for cooperatives; and, Section 720.3085 for homeowners’ associations. With these changes, the collection procedures for all of these types of communities will be substantially the same. The new laws are effective July 1, 2021.
Initially, the new provisions have revised the time for the notices sent by the association attorney for condominiums and cooperatives to 45 days for both the pre-lien first letter and the post-lien notice of intent to foreclose. (Homeowners’ associations were already at 45 days).
The most important and significant addition to this statutory change is the addition of a new notice requirement by associations before they may refer a matter to the association attorney for collection and recover the attorney’s fees involved. This written notice is required to be mailed by first class mail to the address of the owner on file with the association. If the address on file is not the unit or parcel address, a copy must be sent there as well. The association is also required to keep in its records a sworn affidavit attesting to the mailing. The new statute contains a form for that notice which is required to be substantially followed.
As the respective statutory provisions now indicate, associations must incur a minimum of 120 days of collection efforts before a foreclosure action can begin, with a total of three (3) separate required statutory notices. This includes the: (i) initial 30 day notice of the intent to refer the matter to the association attorney (for which no attorney’s fees can be charged to the owner); (ii) 45 days for the pre-lien notice period; and, (iii) 45 days for the pre-foreclosure lien period. As such, in order to best protect the interests of the association, it is recommended that the first 30-day notice be sent at the earliest possible date in the association collection process. This will typically be when the governing documents indicate the assessment to be “late”. Careful review of the governing documents by legal counsel should be undertaken to determine whether there is a specific “grace period” indicated in the documents before the assessment is considered late. Once that determination is made, the board should adopt a formal collection policy that incorporates these new statutory requirements, which will also need to be mailed to all owners. A new provision has also been added that begins with “If an association sends out an invoice for assessments. . .” to unit or parcel owners, such notice is to be sent by first class mail or electronic transmission (email) to the respective addresses for the owners that are in the association official records.
Moreover, if the association wishes to change the method of delivery of an invoice, the new Statute creates specific steps that must be followed precisely in order for the change to be effective. Specifically, a written notice must be delivered to the owner not less than 30 days before the change of delivery method will be implemented. The notice must be sent by first class mail to the address on file with the association. If the address on file is not the unit or parcel address, a copy must be sent there as well. In addition to the notice requirement, the owner must “affirmatively acknowledge” his or her understanding of the new delivery method. The written acknowledgment can be sent electronically or by mail, and must be maintained in the Official Records (although it is not available for inspection by other owners). However, without this acknowledgment, the association may not change the method of delivery. The Statute does not presently include a time frame for the owner to provide that acknowledgment or offer any remedy to the association if none is forthcoming. This can be particularly daunting or problematic when the association changes management companies, when the new company’s procedures differ from the prior company.Before the association attorney can commence any collection work for an association, it will be necessary for the association to provide all of the backup documentation of the compliance with each of these new statutory requirements, as well as the information previously required (such as a current account ledger). If any of the documentation is missing with the initial turnover information, there will be delays in the collection process, which can be detrimental to the association operation. It is therefore imperative that these new procedures are fully integrated into the association operation without delay. We recommend that you contact your Association counsel with any questions on the new procedural requirements to ensure compliance.
Jeffrey Rembaum’s, Esq. of Kaye, Bender, Rembaum attorneys at law, legal practice consists of representation of condominium, homeowner, commercial and mobile home park associations, as well as exclusive country club communities and the developers who build them. Mr. Rembaum is a Certified Specialist in Condominium and Planned Development Law. He is the creator of ‘Rembaum’s Association Roundup’, an e-magazine devoted to the education of community association board members, managers, developers and anyone involved with Florida’s community associations. His column appears monthly in the Florida Community Association Journal. Every year since 2012, Mr. Rembaum has been selected to the Florida Super Lawyers list and was also named Legal Elite by Florida Trends Magazine. He can be reached at 561-241-4462.
Comments: Comments Off on The New Order: Broward County Emergency Order 21-01
Since March 2020, Florida’s Governor has issued a series of Emergency Orders designed to curb the spread of COVID-19, including Emergency Orders prohibiting certain
establishments from operating and imposing regulations on those establishments that were allowed to operate;
Comments: Comments Off on Slow Your Roll: How to Address Speeding Issues in Your Association
Speeding is a big problem for many community associations — a problem that is not always easily addressed or corrected. How can your board slow the speed of traffic in your community?
If your association does not currently have traffic rules, you may be able to rely on a nuisance provision in your Declaration. Alternatively, if your board has the authority to adopt rules and regulations regarding the common areas, the board can adopt traffic rules at a duly noticed board meeting. To enforce the rules, the association has a variety of enforcement tools available, including sending warning letters, notices of violation, fining, suspension of use rights, or further legal action.
Fining is the most common “enforcement tool” that is utilized to curb speeding, for associations who monitor speeding. Fining is most effective when pursued against owners/residents in the community. It is more difficult for an association to pursue fines against visitors, guests, invitees, or contractors who speed. So, for the most part, most associations that pursue fines for speeding opt to only pursue fines against owners/residents who speed. Anytime an association intends to fine an owner or resident, the process and procedures for fining must comply with the statute. Therefore, it would require the board to establish a fining committee (if your community does not already have a committee in place). Notice must be provided to the owner or resident of the violation and the owner or resident must be provided with an opportunity to be heard in front of a fining committee.
For those communities who do not want to impose fines, there are a variety of other enforcement tools available, including sending warning letters, notices of violation, suspension of use rights, or further legal action (such as seeking injunctive relief). When it comes to either fining or the suspension of use rights the association must follow the statutory procedure described above. An additional method of enforcement would be through an agreement with the county which would authorize a local law enforcement agency to enforce state traffic laws on the association’s private roads. Section 316.006, Florida Statutes, authorizes local law enforcement agencies to enforce state traffic laws on the private roads of associations pursuant to an agreement between the association and law enforcement. It requires a majority vote of the board of directors of a homeowners’ association to elect to have state traffic laws enforced by local law enforcement agencies on private roads that are controlled by the association.
There are other practical concerns with regard to enforcement against speeders, most notably, evidence of speeding. How can your board of directors “prove” that a vehicle is speeding? Depending on the speed of the vehicle, it could be established simply by the testimony of the person who saw the car speeding. Some communities have purchased equipment that monitors speed and that can also take photos or videos of the speeding vehicle. If your community is considering purchasing a speed gun, it should be noted that there is an administrative rule that deals with “speed measuring devices”. This rule provides that evidence of the speed of a vehicle measured by a radar speed measuring device is inadmissible in “any proceeding with respect to an alleged violation of provisions of law regulating lawful speed of vehicles” unless such evidence of speed is obtained by a law enforcement officer who meets certain requirements, including the satisfactory completion of certain training courses. The rule also requires a visual determination that the vehicle was speeding and a written citation based on evidence obtained from an approved speed measure device. Also, the particular speed measuring device must meet specifications and must be tested in accordance with other procedural rules related to the testing of speed measuring devices.
Slowing traffic helps promote a more relaxed residential environment and as you can see there are various options available. An association need not choose one however to the exclusion of all others. The key is be consistent and properly apply the various options chosen.
Jennifer Horan focuses her practice on all aspects of condominium and homeowners’ association law. She has over 12 years of community association law and general litigation experience. In addition to practicing law with a number of Florida-based firms, Jennifer also spent time as a Senior Attorney with the State of Florida Department of Health. Here, day-to-day legal services were provided to seven county health departments and children’s medical services. State contracts were drafted, reviewed and approved while she oversaw and directed EEOC investigations. Prior to her legal career, she acted as the Head of Special Education at Richardson Independent Schools in Dallas, Texas.
Comments: Comments Off on Community Update: February Wrap Up – Florida Condo & HOA Law Blog
Spring is just around the corner and sprucing up is often top of mind. Whether that means improving yards, documents, or relationships, this edition of Becker’s Community Update offers practical guidance on how to move forward. Check out the hot topics below, and don’t forget to connect with us on Facebook to get real time updates on these issues and more!
While Mother Nature may be hard to harness, community associations are often tasked with doing just that to protect both residents and property. In Responsibility for Tree Branches and Roots Elizabeth Lanham-Patrie explores how the law decides who needs to tackle this chore.
In the second part of our two part series Amending Governing Documents, Jay Roberts outlines best practices for getting proposed changes approved by membership.
Assessments are not the most popular feature of a community association, but they are a vital resource in maintaining the amenities and ambiance to which the community has grown accustomed. In THIS CASE: Abbey Park Homeowners Association, Inc. v. Bowen, Rob Caves reviews how the Florida court decided the seminal case regarding an owner’s right to withhold payment of an assessment.
If you have new members on your board or a new manager for your community and want them to be part of our Community Update, have them subscribe here:
In Part I of this two-part series, we discussed the importance of amending governing documents. Part II discusses tips on how a board of directors can put itself in the best position to have the proposed amendments approved by the membership.
START EARLY:
Work with the association’s counsel to craft the language appropriate for the amendments well before you plan to present it to the membership formally.
Community associations are not administered by a single director or officer of the board, instead, the affairs of such associations are administered by its board. The articles of incorporation and/or bylaws of an association most often specify the required minimum number of board members. In the condominium context, the Florida Condominium Act provides that in the absence of such specification, the board of administration must be composed of five members (or three members in condominiums with five or fewer units).
Assessments paid by owners are the lifeblood of any community association and efforts to collect assessments are the most consequential and common legal proceedings any association engages in. Typically, there are few valid defenses an owner can raise to challenge the collection of properly adopted assessments. One common defense that is attempted is that the association is failing to properly maintain the common elements of a condominium or the common areas of a homeowners’ association.
The seminal case on the issue of whether owners can withhold the payment of assessments due to the association’s failure to properly maintain the common elements is Abbey Park Homeowners Association, Inc. v. Bowen, 508 So.2d 554 (Fla. 4th DCA 1987). In the case, the appellate court held that the failure to maintain the common elements is not an affirmative defense to the association’s action to foreclose on the unit for the failure to pay assessments. Accordingly, a claim by an owner that the association is improperly maintaining the condominium property would not be a valid defense to the association’s action to collect unpaid assessments or enforce the association’s assessment lien against a unit.
However, there are subsequent cases that hold that while such claims are not affirmative defenses to a foreclosure action by an association, they could constitute counterclaims and entitle the owner to a “set-off” if they were to prove that the association failed to properly maintain the condominium property and such failure resulted in damage to the unit owner or their property. See Qualcom Corp. v. Global Commerce Center Association, Inc., 59 So. 3d 347 (Fla. 4th DCA 2011) (holding that the owner was able to argue at trial that its damages from a roof leak, if proven, could be a “set-off” against the outstanding assessments). However, the facts which would entitle an owner to a set-off would be very specific and would not apply to an owner’s general allegation that the common elements, or common areas, were not being maintained, as was alleged in Abbey Park.
Accordingly, pursuant to the legal principles outlined in the Abbey Park case, the fact that an owner alleges that the association is not properly maintaining the common property, or operating the association, would not be a defense against the association’s action to collect properly levied assessments.
CALLING ALL BOARD MEMBERS AND COMMUNITY MANAGERS
As a service to the community and industry, we are pleased to offer some of our most popular classes online! While our in-person classes remain suspended until further notice due to COVID-19, we are thrilled to bring you the following classes to participate in from the comfort of your own home.
Comments: Comments Off on ACTION ALERT: The insurance industry is backing another bill that is trying to take away your rights and significantly reduce your coverage for roof damage.
The insurance industry is backing another bill that is trying to take away your rights and significantly reduce your coverage for roof damage.
The insurance industry is backing another bill that is trying to take away your rights and significantly reduce your coverage for roof damage. If passed, Senate Bill 76 could potentially cost Floridian homeowners millions of dollars.
We need homeowners and business owners in Tallahassee on Tuesday, February 2nd to be heard and oppose this bill.
Here are some highlights of the bill:
Insurance companies can limit coverage for roofs more than 10 years old based on a “roof reimbursement schedule.” This could result in significant out of pocket expenses for homeowners.
The roof reimbursement schedule limits coverage to a percentage of the amount to repair or replace the roof.
Coverage can be limited to:
70% for metal roofs
40% for concrete tile and clay tile roofs
40% for wood shake and wood shingle roofs
25% for all other roof types, including asphalt shingle roofs
Timeframe to report property damage claims, including Hurricanes, is reduced to 2 years!
Policyholders must send their insurer a Notice of Intent to file a lawsuit prior suing for recovery of insurance proceeds.
Notice of Intent must include: the amount of damages sought, a detailed estimate for repairs, the actions of the insurer that gave rise to the action, and the amount of attorney’s fees incurred by the insured policyholder.
Notice of Intent must be served at least 60 days before filing a lawsuit. Given the 90 day period insurers already have to adjust claims, adding 60 days means generally waiting 5 months from the date the claim was reported before being able to sue for failure to adequately pay the claim.
Limits policyholders’ ability to recover attorney’s fees in a lawsuit against their insurer, a right that has been guaranteed under Florida law for decades.
We need every roofing company to bring a homeowner to the Tallahassee Civic Center on Tuesday, February 2, 2021, to testify against bad legislation backed by insurance companies. Please call your representative and tell them you oppose Senate Bill 76 because it is bad for property owners, insurance consumers and contractors. This could affect your home and your livelihood!
It’s more than a slogan, it’s our firm’s mantra. We are zealous in protecting your rights. We offer 24-hour availability through our answering service. Call us today.
A very interesting case was just decided by Florida’s Second District Court of Appeal. RIVIERA-FORT MYERS MASTER ASSOCIATION, INC., v. GFH INVESTMENTS, LLC. 2020 WL 7767856. To simplify, in a mixed-use community, meaning a community made up of commercial property and residential housing, the Master Association adopted seven amendments to the community’s master declaration. The court referred to the sub associations as the “Liner Buildings.” In general terms, the amendments addressed the Master Association’s authority to approve proposed uses of the property located in the sub communities, (Liner Buildings) increased assessments on them, and imposed additional restrictions on the Liner’s tenants.
I write about the case because it is a great learning case about the relationship between a Master and a Sub and about community living in general. The court said so much that we will break up this blog over a two week period. Let’s start:
Are all amendments voted on by owners to the governing documents legal?
“In determining the enforceability of an amendment to restrictive covenants, the test is one of reasonableness.”Holiday Pines Prop. Owners Ass’n v. Wetherington, 596 So. 2d 84, 87 (Fla. 4th DCA 1992). This court defined “reasonable” as “not arbitrary, capricious, or in bad faith.” Hollywood Towers Condo. Ass’n v. Hampton, 40 So. 3d 784, 787 (Fla. 4th DCA 2010). In other words, as we stated in Holiday Pines, the modification of restrictions cannot “destroy the general plan of development.” Holiday Pines, 596 So. 2d at 87 (citing Nelle v. Loch Haven Homeowners Ass’n, 413 So. 2d 28 (Fla. 1982)). Amendments which cause “the relationship of lot owners to each other and the right of individual control over one’s own property” to be altered are unenforceable. Id. at 88. Such an alteration is considered a “radical change of plans.” Id. Klinow v. Island Court at Boca W. Prop. Owners’ Ass’n, 64 So.3d 177, 180 (Fla. 4th DCA 2011) (footnote omitted). Klinow further defined “radical change” as “a change which would create an inconsistent scheme, or a deviation in benefit from that of the grantee to that of the grantor.” Id. (citing FlamingoRanch Estates, Inc. v. Sunshine Ranches Homeowners, Inc.,303 So. 2d 665, 666 (Fla. 4th DCA 1974)).
Can the HOA Be More Restrictive than the local zoning authority?
It is well established that restrictive covenants can be more restrictive than limitations imposed by municipalities. See, e.g., Luani Plaza, Inc. v. Burton, 149 So. 3d 712, 714–16 (Fla. 3d DCA 2014) (allowing a business owners’ association to prohibit residential use of a commercial property despite municipal permission for residential use); Stuart Sportfishing, Inc. v. Kehoe, 541 So. 2d 169, 170 (Fla. 4th DCA 1989) (holding that a less-restrictive zoning ordinance did not control over a more-stringent restrictive covenant); Tolar v. Meyer, 96 So. 2d 554, 556 (Fla. 3d DCA 1957) (holding that a zoning decision allowing property to be used as a church did not control over a restrictive covenant prohibiting such a use).
Do Owners Give Up Some Freedom When They Move Into a Condo or HOA?
owners of property in condominium complexes necessarily accept a greater degree of restrictionon their property rights); Hidden Harbour Estates, Inc. v.Basso, 393 So. 2d 637, 640 (Fla. 4th DCA 1981)
Next week I’ll write about some other facets of the law discussed in the opinion.
Florida Law has required Condominium Associations of 150 or more units to maintain websites with very specific requirements. Maintaining a generic, public website where governing documents and meeting minutes are uploaded, is simply not sufficient. Specific documents, information, and security, including access password protection, is required.
Katzman Chandler and our friends at Concierge Plus are hosting a webinar to discuss Association websites and statutory compliance.
SFPMA works throughout the State of Florida, we are a multi-member organization for the Condo, HOA and Property Management industry. Through knowledge based Articles, Events and our Members Directory, Clients find the right information to make an informed decisions for their Florida properties.
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The “state of emergency” that had been imposed by Governor DeSantis in light of the COVID-19 pandemic expired on June 26, 2021. As a result, the “emergency powers” given to condominium, cooperatives, and homeowners’ associations in Sections 718.1265, 719.128, and 720.316, Florida Statutes, respectively, are no longer in effect. The emergency powers that were in effect during the COVID-19 state of emergency included conducting board meetings and membership meetings with notice given as is practicable, but did not specifically give associations the authority to conduct meetings remotely. Nevertheless, many associations did hold meetings remotely in an effort to slow the spread of the virus and to protect its residents and employees. (NOTE: The emergency powers statutes were amended effective July 1, 2021, and now specifically provide that during a declared state of emergency, the association may conduct board meetings, committee meetings, elections, and membership meetings, in whole or in part, by telephone, real-time videoconferencing, or similar real-time electronic or video communication.)
Lilliana Farinas-Sabogal
The Florida Legislature has revised the procedures for collecting delinquent assessments, which add additional steps and delays for the owner to pay before legal action can commence and/or attorney’s fees can be recovered. 
