2023 LEGISLATIVE UPDATE

August 19, 2023

This shall serve as Wasserstein, P.A.’s newsletter regarding recent legislative changes of which you should be aware. Please note that the following is only a summary of the key changes and updates that have already gone into effect or will go into effect after July 1, 2023 (along with some color commentary). Please feel free to share it with your fellow board members and property managers!

CONDOMINIUM ASSOCIATIONS AND COOPERATIVES

As we are all aware, the legislature held an emergency session in May of 2022 to adopt regulations for condominiums and cooperatives in response to the Surfside collapse. There were three (3) primary areas on which this legislation was focused:

Milestone Inspections
Structural Integrity Reserve Studies (SIRS)
Reserve Funding

As with anything that is done hastily, it was immediately apparent that the legislation from last year had certain “glitches”. Accordingly, the 2023 legislative session focused on addressing some of those glitches and making further clarifications as the legislature saw fit. The following is a summary of how each of the 3 above-referenced have now been updated:

Milestone Inspections

Milestone inspections are required for most any condominium or cooperative building that is 3 stories or more in height, as determined by the Florida Building Code, when the building reaches 30 years of age as measured from the date of the original certificate of occupancy. If the date of certificate of occupancy is not available, then the trigger date for calculating the 30 years shall be determined based on the records of local building officials. However, please note that this milestone inspection requirement does not apply to any single family, 2 family, or 3 family dwelling with three (3) or fewer habitable stories above ground.

The Phase I milestone inspection must be performed by December 31st in the building’s 30th year, and then every 10 years thereafter. If a building reached 30 years of age before July 1, 2022, then the deadline is December 31, 2024. If the building reaches 30 years of age after July 1, 2022 but before December 31, 2024, then the deadline is December 31, 2025. However, the local enforcement agency may extend the date by which a building's Phase I milestone inspection must be completed upon a showing of good cause that the inspection cannot be timely completed so long as 1) the Association has entered into a contract with an architect or engineer to perform the milestone inspection and 2) the inspection cannot reasonably be completed before the deadline (or other circumstances reasonably justify an extension).

The original legislation had a provision that mandated that buildings within 3 miles of the coastline had to perform their Phase I milestone inspections a bit sooner than those that are located inland. Instead of 30 years of age, such coastal buildings were to be required to have their Phase 1 milestone inspections performed in their 25th year of existence. That has been removed, but it is not gone entirely. Instead, the authority has been delegated to the local enforcement agency to determine if a building is required to have a milestone inspection at 25 years instead of 30 years and that determination can be based upon relevant circumstances, which specifically includes proximity to saltwater.

Regardless of when the milestone inspection is required, the association is responsible for all costs associated with the milestone inspection for the portions of a building which the association is responsible to maintain under the governing documents.

Once it has been determined that a building must have a Phase I milestone inspection, a local enforcement agency must provide written notice of such required inspection to the association and to any owner of any portion of the building which is not subject to the condominium or cooperative form of ownership by certified mail, return receipt requested. Thereafter, the association must notify the unit owners of the required milestone inspection within 14 days after receipt of the written notice from local government and provide the date that the milestone inspection must be completed. The Phase I milestone inspection must be completed within one hundred and eighty (180) days after the owner, or owners, of the building received written notice from local government.

If a Phase 2 inspection is required, then, within one hundred and eighty (180) days after submitting a Phase 1 inspection report, the architect or engineer performing the Phase 2 inspection must submit a progress report to the local enforcement agency with a timeline for completion of that inspection.

Upon completion of both phases of the milestone inspection process, the architect or engineer who performed the inspection must submit a sealed copy of the inspection report with a separate summary of, at a minimum, the material findings and recommendations in the inspection report to the association and to any other owner of any portion of the building which is not subject to the condominium or cooperative form of ownership.

Also, within forty-five (45) days after receiving the applicable inspection report the association must provide a copy of the summary of the inspection report to each owner, regardless of the findings or recommendations in the report, by United States mail or personal delivery to the owner's mailing address, property address, or any other address of the owner provided to fulfill the association's notice requirements and by electronic transmission to the e-mail address or facsimile number provided by any unit owners who previously consented to receiving notice by electronic transmission. The association must also post a copy of the summary in a conspicuous place on the property and must publish the full report and summary on the association's website (if the association is required to have a website).

What about associations that already paid to have an inspection of their building(s) shortly before July 1, 2022 and do not want to have to go through the expense of another inspection under this legislation? Good news. The local enforcement agency may now accept an inspection report prepared by a licensed engineer or architect for a structural integrity and condition inspection of a building performed before July 1, 2022, if the inspection and report substantially comply with the requirements of the statute. Notwithstanding that such inspection was completed previously, the association must still comply with the unit owner notice requirements. If a previous inspection and report is accepted by the local enforcement agency, then the deadline for the building’s subsequent 10 year milestone inspection is based on the date of the accepted previous inspection.

COMMENTARY: The updates from this year gave a bit of breathing room for associations, but not nearly the type of reprieve some were expecting. These inspection requirements are here to stay and the cost not only of these inspections, but the resulting work, is going to result in significantly increased costs of ownership in the coming years. There simply is no magic pill that gets us all safer buildings at little to no cost and kicking the can down the road to future owners is no longer an option for these aging buildings. Hopefully, inflation and insurance premiums will normalize so that the association’s budget will be better equipped to absorb these added expenses and to mitigate the wallet fatigue we are all feeling.

Structural Integrity Reserve Studies (SIRS)

A residential condominium association must have a structural integrity reserve study completed at least every 10 years from inception for each building on the property that is at least 3 stories in height, as determined by the Florida Building Code.

Associations existing before July 1, 2022 that are unit owner controlled must have a structural integrity reserve study completed by December 31, 2024 for each building on the property that is at least 3 stories in height. However, an association that is required to complete a milestone inspection on or before December 31, 2026, may complete the structural integrity reserve study simultaneously with the milestone inspection, but in no event may the structural integrity reserve study be completed later than December 31, 2026.

The structural integrity reserve study must include the following items as related to the structural integrity and safety of the building:

a) Roof;

b) Structure, including load bearing walls and other primary structural members, and primary structural systems as those terms are defined in §627.706, Fla. Stat.;

c) Fire proofing and fire protection systems;

d) Plumbing;

e) Electrical systems;

f) Waterproofing and exterior painting;

g) Windows and exterior doors;

h) And any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000 and the failure to replace or maintain such item negatively affects the items listed above as determined by the visual inspection portion of the structural integrity reserve study.

COMMENTARY: The recent legislative session clarified that commercial condominiums are exempt from the SIRS requirements. So I guess its ok for 3 story commercial buildings to not have to be compelled to properly account for structural replacement work-perhaps the logic is that because all the owner-members of a commercial condominium are businesses and as such, they are in a better financial circumstance to absorb a special assessment than individual residential unit owners.

Further, the terms “floor” and “foundation” were removed from the above list of structural items, but are likely considered part of the catch-all term “structure”. There was a push to remove things like foundations from the mandatory SIRS requirements because they are really not something that an association “replaces”. I suppose a building’s foundation could be replaced in some sort of stepwise process, but it just never was something contemplated as a replacement item that associations funded until all of this SIRS legislation was adopted and it appears, at least for now, that it disappeared in name only.

At a minimum, a structural integrity reserve study must identify each item of the property on the above-referenced list that is being visually inspected, state the estimated remaining useful life and the estimated replacement cost deferred maintenance expense of each item of the property being visually inspected and provide a reserve funding schedule with a recommended annual reserve amount that achieves the estimated replacement cost or deferred maintenance expense of each item of the property being visually inspected by the end of the estimated remaining useful life of the item. The structural integrity reserve study may recommend that reserves do not need to be maintained for any item for which an estimate of useful life and an estimate of replacement costs cannot be determined, or the study may recommend a deferred maintenance expense amount for such item. The structural integrity reserve study may recommend that reserves or replacement costs do not need to be maintained for any item with an estimated remaining useful life of greater than twenty-five (25) years, but the study may recommend a deferred maintenance expense amount for such item (perhaps this is where foundations and floors can be handled).

As mentioned in the prior paragraph, a structural integrity reserve study is based on a visual inspection of the property and it may be performed by any person qualified to perform such study. However, the visual inspection portion of the structural integrity reserve study must be performed or verified by an engineer licensed under chapter 471, an architect licensed under chapter 481, or a person certified as a reserve specialist or professional reserve analyst by the community association institute or the association of professional reserve analysts. However, it is beneficial to note that a milestone inspection, or another inspection completed for a similar local government requirement, performed within the past 5 years which meets the requirements for milestone inspections may be used in place of the visual inspection portion of the structural integrity reserve study.

If the officers or directors of an association willfully and knowingly fail to complete a structural integrity reserve study, then such failure is deemed to be a breach of the officers’ and directors’ fiduciary relationship to the unit owners.

The requirement to obtain a structural integrity reserve study does not apply to the following:

1. buildings less than three (3) stories in height;

2. single family, two (2) family or three (3) family dwellings with three (3) or fewer habitable stories above ground;

3. any portion or component of a building that has not been submitted to the condominium form of ownership;

4. or any portion or component of a building that is maintained by a party other than the association.

The term “dispute”, as used in §718.1255, Fla. Stat., now also includes the failure to:

1) obtain the milestone inspection, pursuant to §553.899, Fla. Stat.

2) obtain a structural integrity reserve study required pursuant to §718.112(2)(g), Fla. Stat.

3) fund reserves as required for an item identified in §718.112(2)(g), Fla. Stat.

4) make, or provide, necessary maintenance or repairs of the condominium property recommended by a milestone inspection or a structural integrity reserve study.

However, the above-cited “disputes” are not subject to mandatory non-binding arbitration. Rather, they must be submitted to presuit mediation and, if unresolved, followed by litigation.

WAIVING, REDUCING OR REALLOCATING RESERVES

The members of a unit owner controlled association may determine, by a majority vote of the total voting interests of the association to provide no reserves or less reserves than required, however, for a budget adopted on or after December 31, 2024 the members of a unit owner controlled association that must obtain a structural integrity reserve study may NOT determine to provide no reserves, or less reserves for the items on the structural integrity list, except that a multi-condominium may determine to provide no reserves, or less reserves, for such structural reserve items if an alternative funding method has been approved by the Division.

Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts and may only be used for authorized reserve expenditures unless they are used for other purposes as approved in advance by a majority of all of the voting interests. For a budget adopted on or after December 31, 2024, members of a unit owner-controlled association that must obtain a structural integrity reserve study may NOT vote to use reserve funds or any interest accruing thereon for any other purpose other than the replacement or deferred maintenance costs of the components listed in paragraph (g)

COMMENTARY: This is where, in my opinion, the most important updates are located.

First, the voting percentage required to waive, reduce or reallocate reserves had always been a majority vote of those who participate in the process, so long as a quorum was attained. However, now for any condominium or cooperative association where a vote is allowed to waive or reduce reserves (and keep in mind after December 31, 2024 no association required to attain a SIRS will be allowed to waive or reduce funding of structural integrity items at all), the percentage required to waive or reduce funding of reserves (or certain permissible categories of reserves) is a majority of the total voting interests, which is a much higher threshold.

Second, the voting percentage required to reallocate reserves for an alternate purpose not only is a now a higher threshold, but after December 31, 2024 any condominium or cooperative association that is 3 stories or higher (required to obtain a SIRS) will not be able to reallocate ANY of their reserves, even those that are non-structural, for any purpose other than the structural items listed under the statute.

Third, the foregoing reserve restrictions make it challenging to pool reserves, at least non-structural with structural.

FLAGS

Patriots Day and September 11th have been added to the list of days when a unit owner may display armed forces flags.

OFFICIAL RECORDS

The statute has been revised to state the following: “the official records of the association are open to inspection by any association member and any person authorized by an association member as a representative of such member at all reasonable times.” Previously, the official records of the association were open to inspection by any association member or their authorized representative.

COMMENTARY: As if one person conducting an official records inspection was not already challenging enough, now we are going to have inspections conducted by teams, and keep in mind that the “authorized representative” that the owner can have tag along can essentially be anyone at all who they want to bring with them. What could possibly go wrong? Furthermore, while I would interpret the language more strictly, I imagine we will see owners contend that the language which allows an owner to bring “any person authorized by an association member as a representative” means that they can name as many additional representatives as they so choose rather than just one (1). Be prepared!

HOMEOWNERS ASSOCIATIONS

ARCHITECTURAL CONTROL

Regardless of any covenants, restrictions, bylaws, rules, or requirements of an association, and unless prohibited by general law or local ordinance, an association may not restrict parcel owners or their tenants from installing, displaying, or storing any items on a parcel which are not visible from the parcel's frontage or an adjacent parcel, including, but not limited to, artificial turf, boats, flags, and recreational vehicles.

COMMENTARY: Decades of absolute architectural control have now been significantly curtailed and it’s essentially a free-for-all with what a resident can store or install in their side yard or backyard, so long as its not visible from the frontage of the home or from an adjacent parcel. However, one of the unclear aspects of this new legislation is what exactly is meant by “visible from an adjacent parcel”. If a neighbor can use a ladder or has a view from a second story window of their own home to see into their adjacent neighbor’s side yard or backyard does that elevated viewing option operate to allow the association to exercise control over those areas? The intention of this legislation was likely to be “visible from ground level” such that an owner with a side yard or backyard having a fence or vegetative barrier surrounding such area would be free to store or install what they want, but since that clarification is not in the statute associations can arguably still contend that if an adjacent owner can see into their neighbor’s side or back yard from any vantage point, that the association can still have absolute control over what is stored or installed in such areas.

FLAGS

Notwithstanding any covenant, restriction, bylaw, rule, or requirement of an HOA, a homeowner may display up to two (2) of the following flags, in a respectful manner:

· The United States flag.

· The official flag of the State of Florida.

· A flag that represents the U.S. Army, Navy, Air Force, Marine Corps, Space Force, or Coast Guard.

· A POW-MIA flag.

· A first responder flag.

A homeowner may fly one United States flag and one flag from the list above from a freestanding flagpole.

COMMENTARY: Unprecedented insurance premiums, record inflation, mandatory property inspections, sizable special assessments…

Legislature’s response: “More flags!”

Yay!? One question that occasionally comes up is what it means to fly a flag “in a respectful manner”. What do you think?

BOARD MEETING NOTICES

Other than emergencies, HOA Board meeting notices must now contain all agenda items for the meeting.

COMMENTARY: This is a welcome change. It mirrors what has long existed for condominium associations. It is beneficial to have a set agenda to limit the action items and thereby streamline the flow and content of Board meetings by keeping the discussion limited to a set number of items so as to not go off track into other topics. We have all been to those meetings that should have been 30 minutes and end up being 3 hours because it became a free-for-all.

FINES

The existing fining portion of the statute has been revised to clarify that a HOA may levy reasonable fines for violations of the association’s declaration, bylaws, or reasonable rules of the association, and that, after the Board's adoption of the fine, the notice to be sent to the offending member at least fourteen (14) days prior to the hearing committee meeting must be sent to the member’s designated mailing or e-mail address, as set out in the association’s official records. Clarification is also provided that the hearing before the independent committee is not optional but rather mandatory. The notice to the offending member must include a description of the alleged violation, the specific action required to cure the violation (if applicable), and the date and location of the hearing. An owner has the right to attend the hearing by telephone or other electronic means. After the hearing takes place, the independent committee must provide written notice to the parcel owner at his or her designated mailing or e-mail address and if applicable to any occupant, licensee or invitee of the parcel owner, of the committee's findings related to the violation including any applicable fines or suspensions the committee approved or rejected and how the parcel owner or any occupant, licensee, or invitee of the parcel may cure the violation, if applicable. Clarification is provided that the independent committee's actions must be approved by majority vote of its members.

COMMENTARY: Not much of this is news for the clients of our office as for the last several years we have uniformly interpreted the fining statute in the same manner as it has now been clarified. Namely, advising that the Board has to adopt each fine (meaning vote on it at a meeting), the content of the 14 day notice to match what is set forth above, that the hearing before the committee is mandatory (and not only required when the owner requests it) and also that the owner can participate by phone or by Zoom. A couple of new additional clarifications are that if the owner has opted into electronic notice, this 14 day notice can now be sent to them via e-mail and also the approval requirement being by a majority of its members.

DEPOSITS

If an association collects a deposit from an owner for any reason, including to pay for expenses that may be incurred as a result of construction on an owner’s lot, such funds must be maintained separately and may not be commingled with any other association funds. Upon completion of the project, the deposit must be returned to the member within thirty (30) days after receiving notice that the member’s construction project, or other reason for which the deposit was collected, is complete. Also, if a member makes a request for an accounting from the association for their funds that were deposited, the association must provide such accounting to the member within seven (7) days after receiving the request.

BOARD MEMBERS – IMMEDIATE REMOVAL AND CONFLICTS

An officer or director in a HOA must be removed from office if charged by information or indictment with any of the following crimes:

1. forgery of a ballot envelope or voting certificate used in the election.

2. theft or embezzlement involving association funds or property, as provided in §812.014, Fla. Stat.

3. destruction of, or the refusal to allow inspection or copying of, an official record of a homeowners’ association which is accessible to parcel owners within the time periods required by general law, in furtherance of any crime. Such act also constitutes tampering with physical evidence, as provided in §918.13, Fla. Stat.

4. obstruction of justice, as provided in §843, Fla. Stat.

Directors and officers in a HOA (including those appointed by the Developer) must disclose to the association any activity that may be reasonably construed to be a conflict of interest at least fourteen (14) days before voting on an issue or entering into a contract that is the subject of a conflict. A rebuttable presumption of a conflict of interest exists if any of the following acts occur without prior disclosure to the association:

1. a director or officer, or relative of a director or officer, enters into a contract for goods or services with the association.

2. a director or officer, or relative of a director or officer, holds an interest in a corporation, limited liability company, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

FRAUDULENT VOTING ACTIVITY IN ELECTIONS

Each of the following acts is considered a fraudulent voting activity relating to HOA elections and constitutes a misdemeanor of the first degree:

1. willfully and falsely swearing to, or affirming at oath or affirmation, or willfully procuring another person to falsely swear to, or affirm an oath or affirmation in connection with or arising out of, voting activities.

2. perpetrating, or attempting to perpetrate, or aiding in the perpetration of, fraud in connection with a vote cast, to be cast, or attempted to be cast.

3. preventing a member from voting or preventing a member from voting as he or she intended, by fraudulently changing or attempting to change a ballot, ballot envelope, vote, or voting certificate of the member.

4. menacing, threatening, or using bribery or any other corruption to attempt, directly or indirectly, to influence, deceive, or deter a member when the member is voting.

5. giving or promising directly or indirectly anything of value to another member with the intent to buy the vote of that member or another member or to corruptly influence that member or another member in casting his or her vote. However, this does not apply to any food served which is to be consumed at the election rally or meeting or to any item of nominal value which is used as an election advertisement including a campaign message designed to be worn by a member.

6. using or threatening to use direct or indirect force, violence or intimidation or any tactic of coercion or intimidation to induce or compel a member to vote or refrain from voting in an election or on a particular ballot measure.

ADDITIONAL LEGISLATION

APPLICABLE TO ALL ASSOCIATIONS

STATUTE OF LIMITATIONS FOR NEGLIGENCE CLAIMS AND CONSTRUCTION DEFECT CLAIMS

Negligence

The time to file a lawsuit founded on negligence has been shortened significantly from four (4) years to two (2) years (and litigation protections for active duty military were also added).

COMMENTARY: This is probably more beneficial for associations as the primary claims of negligence that are brought by associations occur shortly after turnover and are brought against the developer for construction defects (see below). Thereafter, most claims that an association will bring are for breaches of the governing documents, breaches of contracts with third-party vendors or breaches of the statute, all of which still carry a longer statute of limitations. However, negligence claims like water intrusion, slip and falls, etc. that are brought by owners against association will now need to be brought on a quicker timeline or they risk losing the cause of action.

Construction Defects

The time for a HOA to bring a latent (hidden) construction related defect claim has been reduced from ten (10) years to seven (7) years. When bringing an action founded on the design, planning, or construction of an improvement to real property the claim begins from the time one knew, or should have known, of such defect as measured from the issuance of the certificate of occupancy and must be brought within four (4) years. Now, however, the period to file the lawsuit is measured from the earlier date of the issuance of the temporary certificate of occupancy, or certificate of completion, rather than from the date of the issuance of the certificate of occupancy.

As to latent defects, the statute of repose has also been shortened. Previously, so long as the claim was brought within four (4) years from the time of discovery but not later than ten (10) years from the issuance of the certificate of occupancy, the case could proceed, but now the ten (10) years has been reduced to seven (7) years.

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2022 LEGISLATIVE UPDATE

June 11, 2022

This shall serve as Wasserstein, P.A.’s newsletter regarding recent legislative changes of which you should be aware. Please feel free to share it with your fellow board members and property managers!

During the 2022 regular legislative session, a grand total of zero bills were passed into law concerning community associations. While this was initially thought to preclude any new laws from being adopted this year, an emergency legislative session was recently held for the primary purpose of addressing the insurance crisis facing the State of Florida. For the past few years insurance carriers have been mired in claims, predominantly from Hurricane Irma, and that, combined with fears emanating from the Surfside collapse and increasing general liability exposure, led to insurance companies going out of business or pulling out of serving the State, or portions of it. This has led to dramatic increases in property and casualty insurance premiums as many of us have experienced on either a personal level or at the association level. So, the Florida legislature was called into emergency session to address this concern and while insurance was the primary focus, because of the backlash at not passing any sort of legislation related to the Surfside collapse during the regular session earlier this year, the legislature also hastily revisited and passed into law bills concerning safety and financial governance for condominiums and cooperatives that are at least 3 stories tall that had previously not been adopted in the regular session. These new laws primarily concern requirements for condominiums and cooperatives of this height to have mandatory structural inspections and to fully fund reserves. The following is a summary of what was adopted:

CONDOMINIUM ASSOCIATIONS AND COOPERATIVES

MANDATORY STRUCTURAL MILESTONE INSPECTIONS OF CONDOMINIUMS AND COOPERATIVES

All condominium and cooperative buildings that are at least 3 stories or more in height must now conduct a “milestone inspection” by a Florida licensed architect or engineer. The milestone inspection must be performed by December 31st of the 30th year of the building’s age. The 30 year mark will be calculated from the building’s original receipt of its certificate of occupancy.

For condominium and cooperative buildings 3 stories or more in height that are located within 3 miles of a coastline, they will have to conduct their milestone inspection a bit sooner--by December 31st of the 25th year of the building’s age.

For any condominium or cooperative buildings 3 stories or more in height with Certificates of Occupancy issued before July 1, 1992, they will have until December 31, 2024 to perform their initial milestone inspection.

Local enforcement agencies will be required to determine and notify condominium and cooperative associations if they require a milestone inspection. The milestone inspection must be completed within 180 days of receipt of notice from the local enforcement agency.

Milestone inspections will consist of two phases:

Phase 1

A licensed architect or engineer conducts a visual inspection of the structural components of the building(s), both habitable and non-habitable. Phase 1 of the milestone inspection will be mandatory.

The architect or engineer will then issue a report to the local building enforcement agency whether the Phase 1 inspection revealed substantial structural deterioration to any building components, in which case, they will then need to move into Phase 2.

Phase 2

At the discretion of the inspector, a Phase 2 inspection will involve either destructive or nondestructive testing, or both.

The inspector will be required to issue a signed and sealed report to the local inspection authority and the condominium or cooperative at the conclusion of the inspection. The report will detail the manner and type of inspection performed, identify any substantial structural deterioration, and describe the extent of the deterioration.

Under the new law, the milestone inspection report will be an official record. Once completed, associations will be required to distribute a copy of the inspector-prepared summary of the milestone inspection report to all unit owners. The condominium or cooperative must also post the summary conspicuously on association property. The full report must also be posted on an association website, if the community is required to have one.

STRUCTURAL INTEGRITY RESERVE STUDIES

Condominiums and cooperatives will now be required to perform a structural integrity reserve study.

Section 718.103 of the Condominium Act and Section 719.103 of the Cooperative Act have been amended to add the definition of “structural integrity reserve study” as a study of the reserve funds required for future major repairs and replacement of the common areas based on a visual inspection of the common areas.

A structural integrity reserve study must be completed at least every 10 years after the condominium or cooperative’s creation for each building on the property that is 3 stories or more in height. Existing associations must have a structural integrity reserve study completed by December 31, 2024 for each building on the condominium or cooperative property that is 3 stories or more in height.

The structural integrity reserve study may be performed by any person qualified to perform such study, however, a licensed engineer or licensed architect must perform the visual inspection portion of the study. A structural integrity reserve study must identify the common areas/elements being visually inspected, state the estimated remaining useful life and the estimated replacement cost or deferred maintenance expense of the common areas/elements being visually inspected, and provide a recommended annual reserve amount that achieves the estimated replacement cost or deferred maintenance expense of each item being visually inspected by the end of its estimated remaining useful life.

The structural integrity reserve study must be kept in the official records for 15 years from the date of the report, and on the website for all condominiums required to have a website.

If a condominium or cooperative fails to complete a structural integrity reserve study, that failure constitutes a breach of an officer’s and director’s fiduciary relationship to the owners. If the officers or directors willfully and knowingly fail to have a milestone inspection performed, the failure constitutes a breach of the officers’ and directors’ fiduciary relationship to the unit owners. Please note that these provisions of this new legislation may result in increased insurance premiums for directors and officers insurance policies and may also result in insurance carriers demanding proof of compliance before issuing or renewing policies.

BUDGETING AND RESERVES

The amount for required reserve items shall now be determined by the most recent structural integrity reserve study. For all condominiums and cooperatives over 3 stories or more in height, line items must minimally include the roof, load bearing walls or other primary structural members, floor, foundation, fireproofing and fire protective systems, plumbing, electrical systems, waterproofing and exterior painting, windows, and any other item that has a deferred maintenance expense over $10,000.

Effective as of December 31, 2024, no unit owner-controlled condominium or cooperative will be permitted to fully waive or only partially fund reserves for items listed on the structural integrity reserve study. Condominiums and cooperatives will instead be required to fully fund those reserve items pursuant to the structural integrity reserve study required. It will also be prohibited to vote to use such reserves for any other purpose for which they were intended. This applies to all condominiums and cooperatives, regardless of size or location.

DEPARTMENT REGULATORY REQUIREMENTS

On or before January 1, 2023, condominiums and cooperatives that are in existence as of July 1, 2022 must provide the following to the Department of Business and Professional Regulation, Division of Condominiums, Timeshares, and Mobile Homes:

1. The name of the condominium or cooperative;

2. The total number of buildings that have 3 stories in height or higher;

3. The total number of units in all such buildings;

4. The counties in which the buildings are located and their physical address for each building.

Any changes to this information must be reported to the Division within six (6) months of any changes.

The Florida Department of Business and Professional Regulation, Division of Condominiums, Timeshares, and Mobile Homes, has the power to enforce compliance for condominiums and cooperatives regarding completion of the milestone inspection reports, structural integrity reserve studies, and reserve funding.

DEVELOPER REQUIREMENTS

Before a developer may turn over a condominium or cooperative, the developer of any building that is 3 stories or more in height must complete a structural integrity reserve study, and must provide this document at turnover

So that sums it up. After reading through them, it is apparent that these laws are certainly well-intended following the previously unimaginable Surfside collapse, but there are fears that while these laws may prevent another physical disaster that they may simultaneously result in financial disaster for many condominium and cooperative communities across the state, especially 55 plus communities where many residents live off of a tight budget tied to social security or other benefits such as pensions or retirement plans that have been negatively impacted by a decreasing stock market. Those factors, combined with maintenance assessments that were already on the rise due to the insurance crisis and record inflation, are now likely to be further accelerated by the cost of mandated inspections and resulting work and more importantly, the newly adopted and previously unprecedented forced full funding of reserves.

Over the years many condominium and cooperative communities were able to keep their maintenance assessments at an affordable rate by either waiving or only partially funding reserves and instead addressing needs as they arose, but in a couple of years (assuming these new laws are not amended) these reduced funding levels for reserves will no longer be an option meaning that communities will have no choice but to increase their budget to be in compliance with the law. Of course, for those who can afford it, it is easy to contend that saving for a rainy day is a prudent way of budgeting for future expenses but the potential financial fallout from forced savings is a real concern for many Floridians who feel like they are piggy banking for work for which they may never benefit from and that they simply cannot afford. Hopefully in the coming years reasonable adjustments to these laws can be made to protect those who are most financially vulnerable, while also making sure that building infrastructures are well-maintained. Certainly a tall task. Stay tuned!

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2021 Legislative Update

May 26, 2021

This shall serve as Wasserstein, P.A.’s newsletter regarding recent legislative changes of which you should be aware. Please note that the following is only a summary of the key changes and updates that have already gone into effect or will go into effect July 1, 2021 (along with some color commentary). Please feel free to share it with your fellow board members and property managers!

CONDOMINIUM ASSOCIATIONS

Emergency Powers

The emergency powers are now expressly applicable to an emergency declared due to a public health crisis such as COVID-19. The powers can now be used to prevent harm anticipated to be caused in connection with the emergency and not just after the harm or damage has occurred. During a declared state of emergency, in addition to Board meetings, members meetings, committee meetings and elections can be held in whole or in part virtually via telephone, real-time video conferencing or similar real-time communication. However, the emergency powers cannot prohibit unit owners, tenants, guests, agents or invitees of a unit owner from accessing the unit or the common elements or limited common elements for the purpose of ingress and egress from the unit when access is necessary in connections with (a) the sale, lease, or transfer of title of a unit or (b) the habitability of the unit or for the health and safety of such persons unless a governmental order or public health directive from the CDC has been issued prohibiting such access to the unit. However, such access is subject to reasonable restrictions adopted by the Association. The “disaster plan or emergency plan” can now be implemented during the emergency rather than just before or after the emergency. In determining to close or limit access to the condominium property the Board can now rely on the advice of “public health officials” and not just an emergency management official or other licensed professional.

COMMENTARY: These changes are useful to expand and clarify the emergency powers so that they clearly apply not only in connection with hurricane-type disasters, but also during a state of emergency declared for a pandemic or other type of public health crisis. However, there are still some issues that remain unclear such as the ability to not only conduct the various meetings electronically, but whether unit owners are allowed to count for quorum and cast a vote over such mediums (and not by paper or an electronic voting platform). Another open issue is whether the Board can close or limit access to certain groups of people, such as social guests, while allowing access to others, such as residents or certain family members.

Transfer Fees and Security Deposits

The maximum transfer fee charged in connection with a change of ownership or a lease has been raised from $100.00 per applicant to $150.00 per applicant. This fee will be adjusted every 5 years pursuant to the Consumer Price Index. The authority to charge a security deposit for a lessee, which formerly was required to be in the Declaration or Bylaws, may now also be authorized in the Articles of Incorporation.

COMMENTARY: A most welcome update as the old $100 cap caused some Association’s to lose money on processing applications. It was simply an outdated amount and quite honestly, $150 might still be a low cap. However, with the litigation that has been brought in the past 5 years against condos that were charging excessive transfer fees, this $150 cap with periodic updates is probably a fair and reasonable compromise.

While the increase to transfer fees was a valuable change, the extending of authority regarding charging of security deposits to include the articles of incorporation is fairly meaningless since the articles of incorporation almost never contain language dealing with leasing or any other type of use issues. If the legislature wanted to really extend an Association’s ability to charge a security deposit they should have allowed the authority to exist in the rules and regulations.

8-Year Director Term Limit

The law has been clarified to provide that the 8-year continuous years of service runs from service that commences on or after July 1, 2018.

COMMENTARY: This was a needed clarification. For the past few years there has been much debate as to whether the 8 year term limits enacted in 2017 (as modified in 2018) applied to “time served” before the law went into effect. Now we all have certainty that it does not, meaning that this statute will not be something to worry about until 2026, so we can put the snooze button on this one for now.

However, when we do get to 2026 there is still the possibility that at the end of the 8th year (or really at any other time during their tenure) a Board member could resign (and possibly even be immediately re-appointed) and then contend that they did not serve 8 consecutive and uninterrupted years, thereby making themselves fully eligible to continue to serve without any limitations or restrictions. Everyone loves a good loophole, right?

Another lingering issue is the wording of the exception language. It says that any Board member who has served more than 8 consecutive years can still be elected if there are not enough other willing candidates or if they secure the votes of at least 2/3 of all “votes” cast in the election. So, if an association has 3 seats up for election and receives 100 ballots then very likely there will be approximately 300 votes in total cast in the election (3 votes per ballot). 2/3 of 300 is 200. So the Board member would need to secure 200 votes in their favor from 100 ballots and as we all know, you cannot put more than 1 vote per candidate (which would otherwise be called cumulative voting, which is prohibited) so the best any candidate could achieve in this example is 100 votes in their favor, making it impossible for the term limited Board member to possibly achieve 2/3 of all “votes” cast in the election. As such, the legislature really should reword this exception to be a number of votes equal to at least 2/3 of all valid “ballots” cast and counted in the election.

Board Eligibility – Delinquency Only Based on Unpaid Assessments

The law used to provide that a candidate who was delinquent in the payment of “any monetary” obligation to the Association was not eligible to run for the Board. Now, the law has been changed to provide that a candidate who is delinquent in the payment of any “assessment” is not eligible to be a candidate. For purposes of this paragraph, a person is delinquent if a payment is not made by the due date as specifically identified in the declaration of condominium, bylaws, or articles of incorporation and 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.

COMMENTARY: So one problem solved. If a unit owner owes a late fee or fine or a few dollars of interest they are still eligible. Great. But, what about the timing issue? That is seemingly clarified in a way that makes it potentially very unfair. For example, if a unit owner’s intent to run for the Board is due on say the 5th of the month and their assessment for that month came due on the 1st of the month and is not considered late until the 15th of the month, if they have not paid that month’s assessment as of the 5th would they be disallowed to be candidate for the Board? Sure seems like it!

Collections Letters – Pre-Intent to Lien Letter and New Timelines

Before changing the method of delivery for an invoice for assessments or the statement of account, the Association must now deliver a written notice of such change to the unit owner. The written notice must be delivered at least 30 days before the Association sends the invoice for assessments or the statement of account by the new delivery method and the unit owner must affirmatively acknowledge his or her understanding that the Association will change its method of delivery before the Association may change the method of delivery. The unit owner may make the affirmative acknowledgment electronically or in writing.

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. A rebuttable presumption that an association mailed a notice in accordance with this subsection is established if a Board member, officer, or agent of the association, or a manager provides a sworn affidavit attesting to such mailing. The Statute contains a form that should be used.

COMMENTARY: While there was previously never a requirement to send a unit owner a delinquency letter free from attorney’s fees before sending an account for collections, most all Associations routinely sent courtesy letters, warning letters or demand letters, usually through their management company and often at no charge to the unit owner. So, management companies will likely just have to modify their existing letters and make sure that they are substantially in the form that is now required by the statute.

The notices of Intent to Lien and Intent to Foreclose the Lien have been increased from 30 days to 45 days. This makes the timeframes consistent with those provided for in homeowners associations for the same notices.

Annual Budget

The Board shall adopt the annual budget at least 14 days prior to the start of the Association’s fiscal year. In the event that the Board fails to timely adopt the annual budget a second time, it shall be deemed a minor violation pursuant to the Division of Condominiums and the prior year’s budget shall continue in effect until a new budget is adopted.

Notice of Members Meetings

The annual meeting has always required at least 14 days advance notice. The statute has been clarified to provide that if the bylaws do not specify a timeframe for written notice of other types of unit owner meetings, then this same 14 day notice requirement applies to those as well. It further clarifies that the notice may be posted on condominium property or association property rather than only condominium property. Association property is deeded property owned by the association as opposed to condominium property identified in the Declaration of Condominium as common elements.

COMMENTARY: When we think of a condominium association unit owner meeting we all default to 14 days advance notice, and while a condo association can now possibly give less notice than 14 days if the bylaws allow for it (for unit owner meetings besides the annual meeting), the reality is most everyone will continue to default to the same 14 days notice and that is probably the safest way to operate (unless of course a condo needs to move quickly to take a unit owner vote on something like a waiver of reserves or amendment of documents and the bylaws allow for the meeting to be noticed on say 10 days notice instead of 14).

Official Records

Bids must be kept for at least 1 year after the receipt of the bid. Before bids had to be kept for at least 7 years.

Renters now have the right to inspect and copy the declaration of condominium in addition to the bylaws and the rules. Previously, renters had the right to inspect and copy only the bylaws and rules.

COMMENTARY: This is a good correction. The original intention was clearly to allow renters the opportunity to view the documents that actually govern their residency and those provisions were most definitely not going to be found (in most instances) in the bylaws, which usually contain such exciting information as how the Association notices its meetings, what is needed for a quorum and how proxies are used. Renters don’t care about any of that. They really just want to know the use restrictions that are associated with their occupancy and since those are most commonly found in the declaration, adding that document to the list made a lot of sense.

Any person with the right to inspect and copy official records may not be required to demonstrate any purpose or state any reason for the inspection.

Condominiums with 150 or more units have been required to maintain a website and post certain notices and documents on it since January 1, 2019. The new law now provides that the Association can, in lieu of posting on the website, make such documents available instead “through an application that can be downloaded on a mobile device.” The downloadable application must be independent and operated by a third-party provider and must be accessible through the internet and meet all other requirements imposed on the website by the Statute.

COMMENTARY: The legislature, much like my 95 year old grandmother, has seemingly discovered the existence of mobile applications or “apps” as the kids call them. Better late than never!

Natural Gas and Electric Vehicle Charging Stations Installed by Unit Owners

Continuing with the theme of supporting technology, unit owners may now install a natural gas fuel station or electric vehicle charging station within the boundaries of their limited common element or “exclusively designated” parking spaces. Like electric vehicle charging stations, the unit owner must have the station separately metered and must comply with all federal, state and local laws and regulations for installation, maintenance and removal. Also, the contractor hired to install the stations on behalf of the unit owner cannot lien the common elements or Association property if the contractor is not paid for the work but can lien the unit owner’s unit.

COMMENTARY: In my opinion, the bigger change here is adding the “exclusively designated” parking space language because some unit owners have assigned parking that is not actually a limited common element but rather a deeded parking space that they own. Under the prior statutory language the Association could have actually denied such unit owners from installing an electric charging station since their parking space was not a “limited common element” but now that ambiguity is gone and that is a good thing.

Of course, the other “big” addition here is allowing for natural gas fuel stations to be installed in unit owner parking spaces as well. Wake me up when natural gas vehicles become a thing.

Natural Gas and Electric Vehicle Charging Stations Installed by the Association

The Board of an Association may make available, install, or operate an electric vehicle charging station or a natural gas fuel station on the common elements or Association property and establish the charges and the manner of payments for the unit owners, residents or guests who use them and the installation of either type of device shall not constitute a material alteration or substantial addition to the common elements or Association property.

COMMENTARY: We have had several clients ask about installing common area charging stations and the concerns were usually the cost of installation, how to bill for usage, the limited applications (at least for now until electric cars become more prevalent), the issue of certain individuals monopolizing the equipment and of course, the big issue of it being a material alteration and potentially requiring a membership vote. However, having the legislature remove the material alteration concern is fantastic progress and should help “pave the way” (pun intended) to encourage more electric vehicles.

Alternative Dispute Resolution

Arbitration through the DBPR, Division of Condominiums is no longer mandatory for the disputes to which it previously applied (except for election and recall disputes which must still be arbitrated or go to court). The Association or the unit owner now has the option to either go through arbitration (which the parties can agree to be binding and final) or instead go to pre-suit mediation (like homeowners associations have been able to do for quite some time) and if not resolved through pre-suit mediation to then go directly to court.

COMMENTARY: This is great news for anyone that has gone through the arbitration process because it is slow and unrewarding, the rulings have been inconsistent over the years and the arbitrators rarely have awarded full fees incurred, meaning that the Association has almost always had to come out of pocket to enforce its governing documents.

Discriminatory Restrictions

The Board may remove illegal discriminatory restrictions contained in the governing documents without an owner vote.

COMMENTARY: Although illegal provisions were unenforceable anyway, making it simple to eradicate such provisions from the record books was a laudable step forward.

Fines

Payment of a fine approved by the fining committee is now due 5 days after the notice of the approved fine is provided instead of 5 days after the fining committee meeting was held.

HOMEOWNERS ASSOCIATIONS

Emergency Powers

The emergency powers are now expressly applicable to an emergency declared due to a public health crisis such as COVID-19. The powers can now be used to prevent harm anticipated to be caused in connection with the emergency and not just after the harm or damage has occurred. During a declared state of emergency, in addition to Board meetings, members meetings, committee meetings and elections can be held in whole or in part virtually via telephone, real-time video conferencing or similar real-time communication. However, the emergency powers cannot prohibit unit owners, tenants, guests, agents or invitees of an owner from accessing the parcel or the common areas for the purpose of ingress and egress from the unit when access is necessary in connections with (a) the sale, lease, or transfer of title of a unit or (b) the habitability of the unit or for the health and safety of such persons unless a governmental order or public health directive from the CDC has been issued prohibiting such access to the unit. However, such access is subject to reasonable restrictions adopted by the Association. The “disaster plan or emergency plan” can now be implemented during the emergency rather than just before or after the emergency. In determining to close or limit access to the community property the Board can now rely on the advice of “public health officials” and not just an emergency management official or other licensed professional.

Amendments

Any governing document, or amendment to a governing document, that is enacted after July 1, 2021, and that prohibits or regulates rental agreements will only apply to:

1. An owner who acquires title to the parcel after the effective date of the governing document or amendment; or

2. An owner who consents to or votes in favor of to the governing document or amendment.

COMMENTARY: It is interesting that they used the phrase “prohibits or regulates rental agreements” because there are several rental-related amendments that I would contend do not “prohibit or regulate” the actual rental agreements themselves, but instead have an effect on the renters themselves or on other ancillary matters such as approval processes, background checks, transfer fees and security deposits.

With respect to those who did not consent to or vote in favor of a rental amendment retaining their protection from it when there is a change of ownership, this new law further provides that a change of ownership (in this context) is not deemed to occur when an owner conveys the parcel to an “affiliated entity”, when beneficial ownership of the parcel does not change, or when an heir becomes the owner. The term “affiliated entity” is defined in the statute and any such entity desiring to carry over the protections afforded to the predecessor must furnish to the Association documentation as may be requested.

COMMENTARY: The primary purpose of this provision is to allow owners to confidently re-deed their property to a trust or limited liability community for estate planning or asset protection purposes without fear of losing their protection from rental amendments that they did not vote to approve that were passed after July 1, 2021. It will also protect those who are involuntarily thrust into ownership upon the death of the owner from being subject to such rental amendments as well.

Although this new law appears to be fairly broad and protective of the owners with regard to rental amendments, it does provide a key exception--a homeowners association may amend its governing documents to prohibit or regulate rental agreements for a rental term of less than 6 months and may prohibit the rental of a parcel more than three (3) times in a calendar year and those types of amendments will still apply to all parcel owners regardless of whether or not they voted for it.

COMMENTARY: This exception is crucial because it will allow homeowners association that do not already have restrictions on short term rentals to still pass such restrictions after July 1, 2021 with the confidence that if they are approved by the required percentage of the membership that such restrictions will apply to all owners regardless of whether or not they voted in favor and the community can avoid being overrun by AirBNB, VRBO and other short-term type uses.

For the past few years, there was a requirement that notice of an adopted amendment being recorded had to be mailed to the owner’s address as listed on the property appraisers’ website. The notice may now be mailed to the mailing address the Association has listed in the Association’s official records.

COMMENTARY: This is another correction of a past mistake. The property appraiser is not always a reliable of information and requiring the Association to rely on it would mean every time they sent out a document they would have to verify every owner’s address against the property appraiser’s information to make sure what they had on file was up to date. Thankfully this administrative nightmare is over.

Board Adopted Rules

For the past few years, amendments to Board adopted rules and regulations had to be recorded with the County because the legislature previously revised the statutory definition of “governing documents” to add rules and regulations. The definition has now been reverted back to how it previously existed, which means that rules and regulations are no longer part of the statutory definition of “governing documents” and accordingly, amendments to rules and regulations no longer have to be recorded.

COMMENTARY: This is a good corrective measure as it was clearly never the intention of the legislature to require rules and regulations to be recorded and it was just an unintentional consequence of them trying to expand the scope of the definition of “governing documents”. This is good for homeowners associations as it will save them money on recording costs that they will no longer have to pay.

Board Meeting Notice

In addition to any of the authorized means of providing notice of a meeting of the Board, the Association may, by rule, adopt a procedure for conspicuously posting the meeting notice and the agenda on the Association’s website or an application that can be downloaded on a mobile device for at least the minimum period of time for which a notice of a meeting 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 an electronic notice to members whose e-mail addresses are included in the Association’s official records in the same manner as is required for a 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. This is in addition to the traditional notice that is still required.

Elections and Recalls

For many years, election and recall disputes in homeowners association could only be filed with the DBPR, Divisions of Condominiums. Now, an election or recall dispute can still be filed with the Division or it can instead be filed directly in a court. Pre-suit mediation is not required before filing in Court.

COMMENTARY: This is great news for anyone that has gone through the arbitration process because it is slow and unrewarding and the rulings have been inconsistent over the years. But hey, if you like those qualities in your adjudication process then you can still choose to avail your Association of arbitration through the DBPR!

Official Records

Ballots, sign in sheets, voting proxies, and all other papers relating to voting by parcel owners are official records and must be maintained for at least 1 year after the date of the election, vote, or meeting.

Information an Association obtains in a gated community in connection with guests visiting homeowners or community residents are protected official records and cannot be inspected and copied by owners making official records requests.

COMMENTARY: This is a sensible addition to the list of records that are not available for inspection since a list of who is coming and going to and from a property is something for which there is a reasonable expectation of privacy.

Statutory Reserves and Developer Deficit Funding

Statutory or “mandatory” reserves used to be established in 3 ways:

1. The developer initially established them prior to turnover in the budget;

2. The governing documents as drafted by the developer mandate reserves; or

3. The members voted to establish them after turnover.

The new law removes the first type such that statutory reserves are now only created if they are mandated in the governing documents or by a vote of the members.

Year end financial reporting has also been modified to provide that if a homeowners association does not maintain statutory reserves or the governing documents do not obligate the developer to create reserves that this must be noted on the year-end financial report with a bold all caps disclaimer. The change here is adding the “governing documents” term to the provision.

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 does include reserves in the budget, the developer may determine the amount of reserves included. The developer is not obligated to pay for:

1. Contributions to reserve accounts for capital expenditures and deferred maintenance, as well as any other reserves that the homeowners association or the developer may be required to fund pursuant to any state, municipal, county, or other governmental statute or ordinance;

2. Operating expenses; or

3. 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 the assessments receivable from other members plus any other association income and the lesser of the budgeted or actual expenses incurred by the association during such fiscal year.

This law applies to all homeowners associations existing on or created after July 1, 2021.

COMMENTARY: This new law is likely a reaction to the Centex case from 2017 in which the Court determined that developers who established statutory reserves had a duty to pay those reserves (above and beyond their deficit funding of operating expenses) while they remained in control or to annually vote to waive or reduce such reserves.

Collections Letters – Pre-Intent to Lien Letter

Before changing the method of delivery for an invoice for assessments or the statement of account, the Association must now deliver a written notice of such change to the owner. The written notice must be delivered at least 30 days before the Association sends the invoice for assessments or the statement of account by the new delivery method and the owner must affirmatively acknowledge his or her understanding that the Association will change its method of delivery before the Association may change the method of delivery. The owner may make the affirmative acknowledgment electronically or in writing.

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. A rebuttable presumption that an association mailed a notice in accordance with this subsection is established if a Board member, officer, or agent of the association, or a manager provides a sworn affidavit attesting to such mailing. The Statute contains a form that should be used.

COMMENTARY: While there was previously never a requirement to send an owner a delinquency letter free from attorney’s fees before sending an account for collections, most all Associations routinely sent courtesy letters, warning letters or demand letters, usually through their management company and often at no charge to the owner. So, management companies will likely just have to modify their existing letters and make sure that they are substantially in the form that is now required by the statute.

Discriminatory Restrictions

The Board may remove illegal discriminatory restrictions contained in the governing documents without an owner vote.

COMMENTARY: Although illegal provisions were unenforceable anyway, making it simple to eradicate such provisions from the record books was a laudable step forward.

Fines

Payment of a fine approved by the fining committee is now due 5 days after the notice of the approved fine is provided instead of 5 days after the fining committee meeting was held.

ADDITIONAL COVID LEGISLATION

COVID-19 Vaccine Proof Documentation – F.S. 381.00316(1) – (6)

A business entity, as defined in Florida Statute 768.38 to include any business operating in this State, may not require patrons or customers to provide any documentation certifying COVID-19 vaccination or post-infection recovery for them to gain access to, entry upon, or service from the business operations in this State. This statute does not otherwise restrict businesses from instituting screening protocols in accordance with state or federal law to protect public health. The department may impose a fine not to exceed $5,000 per violation.

COMMENTARY: There is some debate as to whether this law applies to community associations because they may not be deemed a “business entity” and owners and guests may not be considered “patrons” or “customers”. However, it is my belief that a community association cannot require proof of vaccination to use the common areas or amenities.

COVID-19 Liability Protection – F.S. 768.38

This new provision of the law protects corporations, including community associations, from civil liability for damages, injury, or death which arises from or related to COVID-19 as long as the Association “made a good faith effort to substantially comply with authoritative or controlling government-issued health standards or guidance at the time the cause of action accrued.” The statute of limitations to bring a claim against the Association is within 1 year after the damage, injury or death occurred.

COMMENTARY: This should give community associations some degree of peace of mind that they will be shielded from liability for COVID-19 claims. However, just be prepared that lawsuits will still be filed contending that a good faith effort to comply with health standards was not met.

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WASSERSTEIN P.A. - 2018 LEGISLATIVE UPDATE

June 15, 2018

2018 LEGISLATIVE UPDATE

This shall serve as Wasserstein, P.A.’s newsletter regarding recent legislative changes of which you should be aware. Please note that the following is only a summary of the key changes and updates that went/will go into effect July 1, 2018 (along with some color commentary). Please feel free to share it with your fellow board members and property managers!

CONDOMINIUM ASSOCIATIONS:

Official Records (Length of Time Records are Maintained): Certain official records must be kept from inception of the association. This includes:

(i) a copy of the plans, permits, warranties, and other items provided by the developer;

(ii) a copy of the recorded declaration of condominium and all amendments thereto;

(iii) a copy of the recorded bylaws and all amendments thereto;

(iv) a certified copy of the articles of incorporation and all amendments thereto;

(v) a copy of the current rules; and

(vi) all meeting minutes.

NOTE: 4 out of 6 of these items are the governing documents of the association. Those should not be any problem producing because a) of their importance and b) most, if not all of them, are recorded amongst the public records anyway. The real problem is this. Forever, the condo statute has required that associations maintain official records for 7 years (except election-related records, which only have to be maintained for 1 year from the election). Now, the legislature seemingly expects associations to conjure up documents like developer plans, permits and warranties, or meeting minutes, from decades ago that may very well have been lost to the pages of time. I am fairly confident that if an owner were to challenge an association founded in say 1980 for not maintaining meeting minutes from then until 2010 that the arbitrator/judge would find this new requirement to apply on a going forward basis and not retroactively (meaning at most, since this new law is going into effect in July of 2018, that the documents that have to be kept forever start with those from July of 2011 and forward). But who knows!

Official Records (Time to Allow for Inspection): Official records must be made available to an owner for inspection within 10 working days after receipt of a written request.

NOTE: Previously, the association only had 5 working days to make official records available. This change makes the condo statute consistent with the HOA statute with regard to the number of days to provide access to official records. The 5 working day requirement was a bit burdensome for associations to comply with, so this is a welcome change.

Website: The July 1, 2018 deadline for an association with 150 or more units to post digital copies of certain official records on its website (except in a timeshare condominium) has now been extended to January 1, 2019. Also, removed from the previous set of requirements for the website is the requirement to post any “proposed financial report” that will be considered at a meeting, and added instead is that the association must post any monthly income or expense statement to be considered at a meeting. Additionally, revised is the provision on “conflict of interest documents” regarding what must be posted and also the provision requiring that contracts all have to be posted on the website. Instead, a “summary” or “list” may be provided with regard to:

(i) all executory contracts (contracts that do not require immediate performance or require ongoing performance);

(ii) a list of bids received in the past 1 year (after the bidding has closed); and

(iii) summaries of bids which exceed $500 which must be kept on the website for 1 year (instead of summaries, the bids may be posted).

NOTE: Hooray for a delay! I just hope that the legislature does not continue to keep revising the documents that do and do not have to be posted. Who can keep track!

Conflict of Interest: Clarifications regarding a contract between the association and a director or officer, or their close relative, were reorganized and consolidated within the statute and include, in addition to other requirements, the following:

(i) The association shall comply with all requirements contained in 617.0832 and the disclosures referenced in that statute must be entered into the meeting minutes;

(ii) The contract must be approved of at least 2/3 of all directors present; and

(iii) At the next meeting of the members the existence of the contract must be disclosed to the members and if a motion is made by any member, the contract must be voted on and may be canceled by a majority vote of those present. If canceled, the association is only liable for the reasonable value of the goods and services provided through the date of termination and not for any other fees or penalties.

NOTE: Last year’s changes were a bit confusing and while consolidated, there is still not clarity. In one part of the statute it essentially states that there is a presumption of a conflict of interest (rebuttable) if a director, officer or relative contracts with the association, but that can be overcome provided certain disclosures are made and requirements met (so conflict of interest contracts are seemingly permissible). However, of note, the legislature left the language from last year pertaining to “service provider” contracts which still states that an association (except for a timeshare) may not contract 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 their relative (unless their ownership stake is less than 1%). So what are they saying here? It’s ok for the association to contract for roof repairs with a company owned by a Board member, but not with a security company owned by a Board member? Seems like a distinction without a tangible difference. Regardless, our recommendation is to avoid conflict of interest contracts. No matter how fair, reasonable, economically beneficial and legally implemented they may be, they always have the appearance of impropriety. Nike says Just Do It! When it comes to contracting with the association, Just Don’t Do It!

Financial Reporting: In the event an association fails to provide an owner with the most recent financial report within 5 business days after receiving a written request and then also fails to provide that same report to the owner within 5 business days of receiving an notice from the DBPR (“Department of Business and Professional Regulation”), Division of Condominiums, the association is prohibited from waiving the financial reporting requirement for the fiscal year in which the owner’s initial request for a copy was made and the following fiscal year as well.

NOTE: This is really just a clarification of the penalty. The prior version of the law did not specify the length of time that the association would be prohibited from waiving/reducing its financial reporting requirements. The new law clarifies that the punishment only extends for a maximum of 2 years. However, this should not really matter much to associations. First, associations should be complying with orders from the DBPR! No reason not to do so! Second, even if an association were not to comply, most associations do not waive or reduce their financial reporting requirements anyway, so the penalty is really not all that significant.

Board Meeting Notices: For meetings regarding special assessments, the “nature” of the special assessment no longer must be included in the notice. The notice must state that assessments will be considered and provide the “estimated cost and description of the purposes for such assessments”. Also, in addition to any other authorized means of providing notice, the Board may adopt by rule a procedure for conspicuously posting meeting notices and the agenda on the website, and for the electronic notice of such meetings. Additionally, any owner consenting to receive notices electronically is solely responsible for removing “spam” or other filters that may block their receipt of mass e-mails.

NOTE: With regard to special assessments, the prior version of the statute required disclosure of the nature, purpose and cost of the special assessment in the notice of meeting. First of all, who knows what the legislature actually intended when it asked us to describe the “nature” of a special assessment. But logically, if the special assessment is for something such as a new roof then the “nature” of the special assessment seems like it would be “a new roof” and the purpose of the special assessment would be to pay for the new roof. So, I’m not sure that removing the “nature” of the special assessment really has a tangible impact because how can one describe the “purpose” of a special assessment (what it’s paying for and/or why the work is being undertaken) without necessarily touching upon the “nature”? Ok, moving on to the second part of the change regarding electronic posting of Board meeting notices, the one real takeaway is that this is not in place of posting notice of the meeting on the condominium property. So, if an association opts into this procedure they are actually volunteering for more work as opposed to actually replacing an outdated form of notification with a more modern and easily disseminated one. Gotta crawl before we walk!

Term Limits: Board members can serve terms that are longer than 1 year if permitted by the bylaws or articles of incorporation. However, a Board member cannot serve more than 8 consecutive years, unless approved by 2/3 of all votes cast in the election or unless there are not enough eligible candidates to fill vacancies on the board.

NOTE: This legislation fixes 2 things from last year’s passage of term limitations. First, it makes the 8 consecutive year limit applicable regardless of the length of each term that added up to those 8 years. Second, it clarifies that a Board member who has served for more than 8 consecutive years can override the limitation if at least 2/3 of all votes cast in the election (not 2/3 of all voting interests) voted for them. While it’s great that the legislature made these clarifications, they failed to address the most significant unknown which is whether this legislation applies retroactively to “time served” and already accrued by a Board member, or instead if this is a going forward restriction that will not need to be addressed until 8 years from now. The DBPR has “informally” stated that it will not be retroactive, but until we have actual case law there is no reliable guidance on this very important question. Additionally, there is also still the possibility that at the end of the 8th year (or really at any other time during their tenure) a Board member could resign (and possibly even be re-appointed) and then contend that they did not serve 8 consecutive years in full, thereby making them eligible to continue to serve without limitation. For the record, just pointing this out-not encouraging it!

NOTE: The prior law suggested that only 1 or 2 year terms were permitted. Now it appears that Board members can serve any length of term provided that the length of term is authorized by the bylaws or articles of incorporation. So let me get this straight, on one hand the legislature is sending a clear message that they really do not want the same people to be on the Board for an extended period of time by implementing the 8 year limitation, yet at the same time instead of limiting the individual terms to 1 or 2 years they are now allowing the possibility of 3,4,5,6,7, or 8 year terms. Face meet palm.

Recalls: Clarifying last year’s changes, a recall is now only effective if it is “facially valid”. If not facially valid, then the Board may reject the recall at the statutorily required meeting and thereby force the unit owner representative of the recall group to file a petition challenging the Board’s determination of facial validity. Alternatively, if a recall is accepted by the Board as facially valid, then a recalled Board member may file a petition to challenge that determination. Also, there are now certain instances in which attorney’s fees may be awarded to the prevailing party.

NOTE: So what exactly makes a recall petition facially invalid? It is fair to assume that if the petition contains a number of ballots equal to less than a majority of all owners that would make it facially invalid. But what if the petition has more than enough ballots, but enough of those ballots are reasonably determined to be frauds or forgeries such that the number of legitimate ballots falls below the majority threshold? Hopefully the legislature adds language next year to specify what constitutes facial validity, or even better, a list of criteria that can be used to properly substantiate a determination of facial invalidity. Otherwise, the case law that will be derived from the DBPR over the next several years will have to suffice!

Material Alterations: Unless the declaration contains a different procedure, a vote of the unit owners must be taken before the material alterations or substantial additions are commenced.

NOTE: While the statute does not explicitly foreclose the possibility that an association can “ratify” a material alteration or substantial addition after the fact, it now seems that this practice will no longer be available. This is a big problem. Imagine your Board decides to change the roof from a foam roof to a rubber roof and that the declaration requires membership approval for all material alterations. Now, let’s further assume that even though this is a material alteration that the Board reasonably believes that this change in material falls under what is called the “necessary maintenance” exception, which would absolve the association of needing membership approval because it is using improved and longer lasting technology. The Board goes forward with the project, taking out a loan and passing a special assessment. Then an owner challenges the Board for not taking a vote of the membership and let’s say that the “necessary maintenance” exception is somehow not permitted and the arbitrator/court determine that the members should have been allowed to vote. Under the prior case law, the association could have been allowed to take an after-the-fact vote to ratify the material alteration and avoid the colossal waste of having to remove all of the new materials (while still also having to pay for them in full), as well as avoiding the additional cost of installing the old technology in its place. However, under this new law it appears that this may no longer be a viable option. Hopefully this will be repealed next year but if not, then associations may want to strongly consider amending their declaration to allow for after-the-fact ratification of material alterations.

Fining: The fining committee appointed by the Board must have at least 3 members who are not officers, directors, or employees of the association, or their spouse, parent, child, brother or sister. If a fine is approved by a majority of the committee the payment is due 5 days after the date of the committee meeting/hearing and the association must provide written notice of the approved fine.

NOTE: Aside from the 5 day waiting period for payment, which is wholly new, these changes are welcome because what they do is harmonize the condo statute with the existing fining procedures contained in the HOA statute. There really was no need for the two statutes to differ on these types of things. We can only hope that further changes like this are implemented in the future so that we can avoid unnecessary distinctions between condos and HOAs.

Electric Vehicles: A declaration of condominium, restrictive covenant or Board may not prohibit any unit owner from installing an electric vehicle charging station within the boundaries of the unit owner's limited common element parking area. The unit owner is entirely responsible for the costs of the charging station (which must be separately metered), as well as its installation, operation, maintenance, repair, insurance, and removal if no longer needed. It also cannot cause irreparable damage to the condominium. The association may impose certain requirements upon the installation and operation of the charging station, including, for example, that the unit owner comply with reasonable safety requirements, building codes and architectural standards adopted by the association governing charging stations, and that the unit owner use the services of a licensed and registered electrical contractor or engineer knowledgeable in charging stations. Labor performed on or materials furnished for the installation of a charging station may not be the basis for filing a construction lien against the association, but such a lien may be filed against the unit owner.

NOTE: It appears that the theme of this year’s body of legislation is technology and these changes are certainly a significant step forward. However, there are still holes in it. For example, why does this right to install a charging station only apply to limited common element parking areas? What about condos where the parking spaces are not limited common elements, but actually deeded properties themselves? If a unit owner wants to install a charging station within the boundaries of their deeded parking space is that not allowed? What if the boundaries of a deeded parking space or a limited common element parking space provide insufficient room for the equipment? Then what? Also, who pays to upgrade the condominium’s electrical grid/capacity to handle the increased usage of electricity? Still crawling before walking here, but that’s ok, especially when it’s in the right direction!

HOMEOWNERS ASSOCIATIONS:

Board E-Mails: Board members are permitted to communicate on association matters by e-mail, but cannot vote by e-mail.

NOTE: This language was implemented into the condo statute a few years ago, so this is another step towards harmonizing the condo and HOA statutes with one another. This provision is intended to foster discussion, but make sure that decisions are not being made via e-mail!

Amendments: A proposal to amend the governing documents must contain the full text of the provision to be amended with new language underlined and deleted language stricken. However, if the proposed change is so extensive that underlining and striking through language would hinder rather than assist the understanding of the proposed amendment, the following notation must be inserted immediately preceding the proposed amendment: "Substantial rewording. See governing documents for current text." Also, an immaterial error or omission in the amendment process does not invalidate an otherwise properly adopted amendment.

NOTE: This process for proposed amendments has been part of the condo statute for years so this is further evidence of the legislature’s effort to streamline and harmonize the two statutes.

Payments: Any payment on a delinquent account is applied first to interest, then any late fees, then to costs and attorney’s fees and lastly to assessments and this is regardless of any “accord and satisfaction” or allocation instructions placed on or accompanying the payment.

NOTE: As with amendments, this language regarding application of payments has been part of the condo statute for years and is now being replicated in the HOA statute. What I would like to see both statutes clarify further is that when applying the payment to the assessment portion of the debt, that the payments are to be applied to the oldest assessment first. While this is what most practitioners advise because it the fairest to the unit owner, the statute does not provide specificity.

Fining: If a fine is approved by a majority of the committee the payment is due 5 days after the date of the committee meeting/hearing.

NOTE: This 5 day provision was also added into the condo statute this year so the theme of unification of the condo and HOA statutes continues! It is a bit odd that the legislature chose to make the date of the meeting/hearing the measure of when the 5 days begins since the association is required to send a written notice of the approval of a fine to the owner and that notice may not be received by the individual within 5 days of the meeting/hearing, but hey, at least the two statutes are the same, right?

Elections: If an election is not required because the number of candidates is equal to or lesser than the number of open seats and assuming floor nominations are not required, those candidates become the members of the Board even if there is not a quorum to hold the annual meeting.

NOTE: There has been at least one case on this issue decided by the DBPR so this change is an effort by the legislature to further reinforce that where no election is actually needed because there are not more candidates than seats open, the existing Board cannot use the lack of a quorum at the annual meeting to roll the existing Board over and thereby prevent those candidates who timely submitted their applications from being seated as Board members. The reason this makes sense is that even if there had been a quorum, the result would have been that these individuals would have been elected by what is commonly referred to as acclimation. It wouldn’t have been a contest.

Preservation of Covenants: An association seeking to preserve its covenants may now record a summary notice which must contain specific information, a list of which is identified in the new statute, and for which the new statute also provides a form. A copy of this summary notice as filed with the county for recording must be included as part of the next notice of meeting or other mailing sent to all members. Additionally, each year at the first Board meeting which follows the annual meeting (but not including the organizational meeting), the Board must consider the desirability of preserving its covenants. This becomes effective as of October 1, 2018.

NOTE: A HOA’s recorded covenants are extinguished under what is called the Marketable Record Title Act (“MRTA”) if they are not “preserved” every 30 years. Previously, to preserve the covenants a specific notice of meeting had to be sent to all members 7 days prior to the Board meeting at which the issue would be considered and 2/3 of the Board had to vote in favor of the preservation at that meeting for it to pass. Then a certificate was prepared and recorded. This new legislation essentially removes the notice and meeting requirement, although a Statement of Marketable Title Action (which is contained in the statute and has been slightly updated) is still required to be sent to all of the members before recording the new summary notice. Please note that if the 30 year deadline has passed all is not lost. There is still a procedure referred to as “revitalization” which allows a HOA to essentially revive its extinguished covenants, but it requires a vote of the membership and a lot more paper work. Don’t let that happen! Instead, call a fantastic community association attorney to assist your community!

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Wasserstein, P.A. - 2017 Legislative Update

July 13, 2017

2017 LEGISLATIVE UPDATE

This shall serve as Wasserstein, P.A.’s newsletter to our clients regarding recent legislative changes of which you should be aware. Please note that the following is only a summary of the key changes and updates that went into effect July 1, 2017 (along with some color commentary):

CONDOMINIUMS, COOPERATIVES and HOMEOWNERS ASSOCIATIONS:

Estoppel Letters: The time that a preparer has to issue an estoppel letter is now 10 business days (reduced from 15 calendar days) and the fee may not be charged if the estoppel letter is not timely provided. The estoppel letter fee charged by the preparer must be established either by board resolution or by contract, and the fee that a preparer may charge is now statutorily capped at $250, with an additional $100 that can be added if a rush 3 business day turnaround is requested, and another $150 that can be added if the account is delinquent. If a requesting party is seeking estoppel letters for more than one property in the same association, then there are further fee caps associated with that type of request. All statutory fees will be adjusted for inflation every 5 years. If an estoppel letter is requested in conjunction with a closing that ultimately does not occur, the requesting party shall be entitled to a refund of the estoppel fee so long as they request the refund in writing and do so within 30 days of the failed closing date. The refunded fee then becomes an unpaid assessment owed by the owner of the property. The estoppel letter that is ultimately provided must be drafted such that its content is valid for 30 days (if sent electronically to the requesting party) or 35 days (if sent by regular mail). The estoppel letter must now contain not only a breakdown of the debt owed, but it must also include “other information” such as:

· the existence of a capital contribution, resale fee, transfer fee or other fee due;

· the existence of any violations associated with the property;

· the association’s right to approve or disapprove of a transfer of the property;

· the existence of a right of first refusal;

· contact info for other associations of which the property is a member (sub-associations, master, recreational); and

· the contact info for all insurance maintained by the association.

The association must designate on its website a person or entity who is authorized to receive and process estoppel requests.

NOTE: The title agents and realtors had been lobbying for years for this legislation and 2017 was the year it finally passed. The legislature added significant content to the estoppel letters, and therefore, increased liability and exposure for preparers while simultaneously reducing turnaround time and capping fees. Ugh!

NOTE: Going forward please note that for estoppel letters requested in connection with our firm clients, we will be charging requesting parties the dollar amounts indicated by these new statutory provisions.

CONDOMINIUM ASSOCIATIONS:

Fire Sprinklers and Engineer Life Safety Systems: This is the one section of this legislative update concerning legislation that was not passed. House Bill 653, which was vetoed by Governor Rick Scott, would have pushed back deadlines for retrofitting high rise residential condominiums with either fire sprinklers or an engineered life safety system (“ELSS”) from 2019 to 2022 and would have also allowed high rise condominiums to opt out of having to install an engineered life safety system. The reason this bill was important for high rise condominiums is that many voted last year to opt out of retrofitting their building(s) with fire sprinklers. However, in the absence of a fire sprinkler retrofit, high rise condominiums are required to alternatively install an ELSS, which could be just as costly, if not more costly than fire sprinklers. Since this legislation was vetoed, high rise residential condominiums cannot opt out of installing an ELSS and will instead need to focus on having their work completed by end of 2019.

NOTE: Governor Scott justified vetoing this bill based upon the recent fire at Grenfell Towner in London that killed dozens of people, along with a general goal of promoting and protecting life safety. While this reasoning is both admirable and understandable, the vetoing of this bill is going to result in sizable special assessments for high rise condominiums, which in turn will mean some unit owners, especially those on fixed incomes, will no longer be able to afford their home.

NOTE: If you manage or reside in a high rise condominium, please do note that per the current fire code, high rise residential condominiums are not required to retrofit the building(s) with fire sprinklers or an ELSS if all units have exits to an outdoor corridor. However, the fire code is always changing, as are local requirements, which may be more stringent, and if your condominium is a high rise it is HIGHLY recommended that you speak to your local/county fire marshal and/or a fire safety engineer to determine your condominium’s obligations.

Criminal Penalties: Forgery of a ballot envelope or voting certificate, theft or embezzlement of funds, and the destruction or refusing to allow inspection or copying of official records (in the furtherance of any crime) are now punishable as crimes. If charged with such a crime, a board member must be removed from office and the vacancy filled. If the charges are resolved without a finding of guilt, the board member must be reinstated for the remainder of their term, if any. Also, any officer, director or manager accepting “kickbacks” could face criminal penalties.

NOTE: It was already challenging enough to find volunteers willing to serve on condominium boards and then this legislation gets passed. Let’s take a thankless, unpaid position and make it even less appealing by adding potential criminal liability! Hooray! I can tell you that these penalties were advocated against due to the potential chilling impact they may have on the pool of willing volunteers, but nonetheless, a few horror stories, primarily out of Miami-Dade County, drove the legislation to pass. Board members beware!

NOTE: Managers and board members will want to consult with their association’s insurance agent to make sure that their directors and officers/errors and omissions coverage provides a defense not only for civil matters, but also for criminal charges that could be brought under these new statutory provisions.

Conflict of Interest (Attorney): An association cannot hire an attorney who represents the association’s management company.

NOTE: This is going to create unintended consequences as often times the management contract requires the association to indemnify and therefore, defend, the management company and property manager in lawsuits brought against them while working for the association. This legislation would seem to require that the same attorney could not represent both the association and the management company/manager in such actions.

Conflict of Interest (Service Providers): An association may not employ or contract 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 relative with the third degree of blood or marriage of a board member or officer. This does not apply if the officer, director or relative owns less than 1% of the company.

Conflict of Interest (Directors): Directors, officers, and their relatives must disclose conflicts of interest. There is a rebuttable presumption that a conflict exists if a director, officer, or relative within the third degree of blood or marriage either enters into a contract with the association or holds an interest in company that conducts business with the association.

Purchase of Units: A board member, manager or management company cannot purchase a unit at the association’s lien foreclosure sale or accept a deed in lieu of foreclosure resulting from unpaid assessments (except in a timeshare condominium).

NOTE: Unfortunately, this was a well-intentioned but poorly executed provision of the legislation. It has a loophole the size of Lake Okeechobee as any individual (or company) who is now personally precluded from purchasing a unit in foreclosure can still very easily execute the purchase of the unit either in the name of a limited liability company or through a “strawman” who would only hold title temporarily and then deed it over to the individual. A for effort. F for effectiveness. Try again next year legislature!

Management: A party providing maintenance or management services to a residential condominium may not purchase a unit at the association’s lien foreclosure sale. If the maintenance or management company owns 50% or more of the units in a condominium, then a majority of the other unit owners can vote to cancel the contract.

Official Records (Bids): Bids for materials, equipment or services are to be kept as official records for 7 years.

Official Records (Access by Renters): A renter of a unit now has the right to inspect and copy the association’s bylaws and rules.

NOTE: The legislature missed the mark here almost entirely. The intention was obviously to allow renters to see exactly what restrictions they would be subject to as residents in the condominium and as most everyone (except the drafters of this legislation) knows, the key document in this regard is the declaration of condominium. I don’t believe that renters will care to look at the bylaws to see what constitutes a quorum for a membership meeting or how much notice needs to be given to have a special board meeting. Naturally, they would want to look at the declaration to see if they are allowed to have pets, if the association can tow improperly parked vehicles, the nuisance provisions, and the other use and occupancy covenants that may actually have an impact on their tenancy.

Financial Reporting: An association that operates fewer than 50 units must prepare a financial statement based on its total annual revenues and not just a report of cash receipts and expenditures.

Financial Reporting: An association shall provide an annual report to the Department of Business and Professional Regulation (the “DBPR”) containing the names of the financial institutions with which it maintains accounts and a copy of such report may be obtained from the DBPR upon written request of any association member.

Debit Cards: An association and its officers, directors, employees and agents may not use a debit card issued in the name of the association or billed directly to the association, for the payment of any association expense. Use of such a card for purposes other than legitimate association expenses may be deemed credit card fraud.

NOTE: The statute is silent on credit cards so for those associations that previously used a debit card for certain purchases, a credit card may be a viable way to go.

NOTE: As with the enactment of criminal penalties, it seems like this is another piece of this year’s legislation driven by a few bad apples. Even so, what is the message being sent here? That it’s not ok to use a debit card because it allows an authorized individual to spend money the association actually has in its bank account, but it’s perfectly fine for that same person to use a credit card and potentially incur charges for which the association may not have the funds to repay? Once again, a well-intentioned but poorly executed provision.

Website: By July 1, 2018, an association with 150 or more units must post digital copies of certain official records on its website (except in a timeshare condominium). The website must contain a section accessible only to unit owners and the association must provide a username and password upon request. Notices of unit owner meetings must also be posted on the first page.

NOTE: Hooray for forced technology!

Term Limits: A board member may not serve more than four consecutive 2 year terms unless approved of by 2/3 of the total voting interests or unless there are not enough eligible candidates to fill the vacancies.

NOTE: From the plain reading of this provision, it would seemingly not apply to board members serving 1 year terms so a board member who has served for 20 consecutive 1 year terms would be eligible to continue to serve in perpetuity whereas a board member serving 4 consecutive 2 year terms is limited. Also, there is uncertainty as to whether this legislation applies retroactively to prior service accrued before July 1, 2017 or if this is a going forward restriction that won’t need to be addressed until 8 years from now. Additionally, there is the argument that at the end of the 8th year (or really at any other time during their tenure) a board member could resign (and possibly even be re-appointed) and then contend that they did not serve 4 consecutive 2 year terms in full, thereby making them eligible to continue to serve. Finally, there is a question as to how the 2/3 voting exception would work. Would it have to be voted on before the election materials are sent out? Is it voted on by proxy or in person at a meeting of the membership, or by written consent, or is the individual permitted to appear on the ballot and if 2/3 of the owners cast votes for the individual then they can serve? Does the individual have to fund the voting effort to allow them to continue to serve or does the association pay for the mailings and other costs? Lots of questions that are sure to result in further disputes. Just what you wanted to hear, right?

Recalls: The board is still required to hold a meeting within 5 business days after receipt of a recall but is longer required to certify or not certify the recall.

NOTE: There are differing interpretations on what this change means. Some practitioners believe that the board is still permitted to file a recall arbitration petition with the DBPR when challenging a recall, some believe that the burden to file a recall arbitration petition with the DBPR falls on the owners voting for the recall, and others contend that the recall is automatically deemed effective and that the board members who were recalled would have to fund a recall arbitration petition with the DBPR themselves. Once again, lots of uncertainty over procedure that is sure to result in disputes. Fantastic.

Suspension of Voting Rights: Voting rights can now only be suspended if the unit owner owes the association more than $1,000 and the debt is unpaid for more than 90 days. Proof of the debt must be provided to the unit owner at least 30 days before the suspension can take effect.

NOTE: The statute allows for suspension of both voting rights and amenity access for delinquencies over 90 days past due. Interestingly, the legislature decided to only add these new requirements with regard to suspension of voting rights and not with regard to suspension of amenity access. Apparently, the legislature views an owner’s right to vote as more important to protect than their right to use the swimming pool, exercise facility or other amenities. While voting is definitely an important aspect of condominium living, in my experience unit owners are usually more concerned with losing their amenity access.

Receivers: A receiver may not exercise voting rights of any unit that is placed in receivership for the benefit of the association.

Ombudsman: The ombudsman has the express power to review secret ballots cast in a vote of the association.

Arbitration: Arbitrators must be attorneys licensed for at least 5 years and have mediated at least 10 disputes involving condominiums within the past 3 years, mediated at least 30 disputes of any nature in the last 3 years, or they must be board certified in real estate or condominium law. Arbitration certification is valid for 1 year. An arbitrator must conduct a hearing within 30 days of being assigned a case and arbitration decisions must be rendered within 30 days of the hearing. Failure to render the decision in 30 days can result in loss of certification.

NOTE: Wow, I actually like this one!

Termination: A termination must now be approved by the DBPR after it is approved by at least 80% of the unit owners. The DBPR must approve the plan of termination within 45 days of filing. The minimum percentage of owners needed to defeat a termination is now 5% (reduced from 10%). The ability to vote to terminate again after a failed vote is now 24 months (increased from 18 months). Any owner of homestead property objecting to a successful termination must now receive at least his or her purchase price regardless of party from whom the unit was purchased. The definition of "bulk owner" for which special disclosures are required is reduced to those owning 25 percent of the units (reduced from 50 percent of the units) thereby increasing the pool of parties needing to make such disclosures.

NOTE: Don’t terminate your condominium! What else am I going to do with my time?

COOPERATIVES:

Financial Reporting: The prohibition against waiving the financial reporting requirement for more than three years in a row has been eliminated and exception that cooperatives with fewer than 50 units are exempt from preparing a compilation, review or audit, regardless of revenues, has been removed.

HOMEOWNERS ASSOCIATIONS:

Financial Reporting: The exception that associations with fewer than 50 lots are exempt from preparing a compilation, review or audit, regardless of revenues, has been removed.

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Common Contractual Conditions to Cover Community Associations

May 21, 2015

As a community association attorney, I see many contracts come across my desk for review. What concerns me are the number of contracts that do not. You aren't dealing with Vito Corleone and an irrefusable offer! Any time a vendor is seeking to provide work or services to your community, you are the one in a position of power and it is of the utmost importance that your association insist on some basic protections.

First, you will want to make sure the vendor is licensed, that they are adequately insured, that they provide worker's compensation coverage to their employees and that they will agree to name the association as an additional insured on their general liability policy. These base requirements will be applicable to most all vendors providing goods and services to community associations and confirmation from the vendor should be insisted upon at the outset.

Next are the legal protections in the contract itself - indemnification and prevailing party attorney's fees. Simple enough to have input into any agreement, but when omitted can lead to disastrous results. What happens if during the course of a vendor's work they injure one of your residents or cause damage to a resident's personal property? You guessed it - that resident is suing the association. Without an indemnification provision, the association will likely have to bear the burden of defending itself and potentially paying for a vendor's mistake. Now what happens if the vendor does not cause any injuries or property damage, but simply fails to live up to the terms of the contract? If your contract with that vendor does not allow the prevailing party in litigation to recover its attorney's fees from the losing party, it means that even if your association won its lawsuit against the vendor, the association would not be able to recover its attorney's fees, which very well could exceed the underlying claim.

Finally, where appropriate, your association should insist that any guarantees or warranties on labor or materials be provided in writing along with the contract and before work begins so that the association knows exactly what the vendor or manufacturer will be providing (or more importantly, not providing). Often, a contract will reference generally that the vendor or manufacturer will provide a warranty but does not specify the duration, limitations or conditions. Make sure to get a copy of these documents before putting pen to paper.

Of course, to best ensure your community's protection, it is recommended that you retain the services of a community association attorney to review all contracts. Conveniently enough, the contact information for such an attorney can be found immediately below.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

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Abandonment Issues

August 26, 2014

All that empty space and no right to use it…until now.

A year ago I wrote an article titled “Is Your Association Down with OPP?” discussing the pros and cons of renting out empty units without first taking title. The legislature has heeded the call and last month amended the Condominium Act to allow condo associations certain rights with regard to abandoned units, including the right to rent them out. Here’s how it works:

After mailing or hand delivering a 2 day notice to the owner of record at their last known address, a condominium association can now enter a unit to clean it up, perform necessary maintenance or repairs, and to turn on utilities (get that A/C going to prevent mold!) if a unit is “abandoned”. The association can then charge all costs incurred to the unit ledger and lien for the amounts (if they are unpaid) the same as an assessment. Also, if a unit is “abandoned” a condominium association can petition the court to appoint a receiver to rent out the unit to offset costs incurred with regard to the unit and unpaid assessments.

A unit is defined as “abandoned” if:

The unit is in foreclosure and no tenant appears to have resided in the unit for 4 continuous weeks without providing prior written notice to the association (i.e.-someone sending a letter stating they will be out of town for a month);

When a unit is not in foreclosure, but no tenant appears to have resided in the unit for 2 consecutive months without providing prior written notice to the association and the association is unable to contact the owner or determine their whereabouts after reasonable attempts.

If your association has questions as to how best to make use of this great addition, it is recommended you contact a community association attorney.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

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Wi Fi Oh My!

May 12, 2014

Providing a wireless internet connection in common areas has become commonplace in recent years. Many associations leave their network open, without a password, so that residents may freely join the network and access the internet from one of their portable devices. However, this puts the association at risk for liability stemming from illegal downloads. A colleague of mine recently defended an association in a matter where a non-resident accessed their unprotected internet connection and used it to illegally download certain..lets call them…copyrighted materials. While the matter eventually settled it did certainly prove the importance of password protecting internet connections. Of course, an authorized resident may have the password and still use the association’s internet connection to engage in illegal downloading. In this regard it is wise to create a terms and conditions page that each user must also accept before accessing the association’s internet connection.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-399

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Knowledge is Power

October 20, 2013

We have all heard the phrase “knowledge is power” but a recent Florida case involving a condominium association suggests that a lack of proper knowledge may prove to be even more powerful!

In the process of collecting delinquent assessments, a representative of the association’s management company is often required to attest to the process and procedures concerning their company’s handling of owner payments and account ledgers. There are, however, instances where the current management company may have had a predecessor at the property, or maybe even multiple predecessors, who handled the particular delinquent account at issue during their tenure. So this naturally raises a question as to how the current management company can properly attest to the veracity of the records that predate their involvement with the association.

The answer is that the account history maintained by a prior management company has routinely been admitted as evidence under what is referred to as the “business record exception” in order to allow the association to fully substantiate the total amount due and owing. However, in the recent case of Yang v. Sebastian Lakes the court held that it was not sufficient for the association’s current property management representative to authenticate the records of the prior company under the business records exception because the individual lacked personal knowledge of the predecessor’s practices and procedures and could not attest to the veracity of their records. Really?

This is surprising since the court’s opinion is in direct conflict with the holding of the WAMCO case which is routinely relied upon and conversely holds that a testifying witness may indeed authenticate the records of a predecessor through the business records exception even though the witness is not aware of the predecessor company’s specific practices and procedures.

In comparing the two differing opinions, the WAMCO decision seems to makes more sense, at least from a real-world perspective. Take for example the account history associated with a loan. As we are all aware, ownership and servicing of a loan may change hands several times before there is either a payoff or a default. In the case of a default, the logic under Sebastian Lakes would require the current holder of the loan to march a parade of witnesses into court so they could each testify as to how their specific company maintained the account history and recordkeeping for the loan during their period of ownership/servicing. Then again, adding a parade to what many people already believe to be a circus may seem like a natural pairing so why not?

Even more concerning is that the Sebastian Lakes holding fails to account for the scenario where the predecessor, whether it be a bank, loan servicer or management company no longer exists. It is, of course, impossible to obtain testimony from a representative of a non-existent entity, so under Sebastian Lakes there would seem to be no way to properly authenticate the prior records. Great outcome!

Even though Sebastian Lakes seems to arrive at a somewhat strange conclusion it is beneficial in that it identifies a defense that has gained a degree of traction and reinforces the value of engaging your current management company to audit the records received from a prior management company for accuracy and consistency with generally accepted accounting principles, which, in turn, will allow them to more accurately testify on your behalf when necessary.

Daniel Wasserstein
E-mail: danw@wassersteinpa.com
561-288-3999

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