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:

1. Milestone Inspections
2. Structural Integrity Reserve Studies (SIRS)
3. 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.