2015 LEGISLATIVE UPDATE
This shall serve as Wasserstein, P.A.’s newsletter to our clients regarding recent legislative changes of which you should be aware. As of July 1, 2015 the most significant bill for community associations that was passed into law was HB 791. Most changes included in HB 791 impact both condominiums and homeowners associations unless otherwise specified. The following are the key changes and updates:
CONDOMINIUMS AND HOMEOWNERS ASSOCIATIONS:
Electronic Voting: One of the most significant changes passed this session is that associations may now conduct elections and other membership votes via an electronic (internet-based) system. The new law includes requirements necessary to establish an electronic voting method, including a board resolution adopting this manner of voting. An owner’s consent to online voting is required, but if the owner does not consent then he or she is still entitled to vote by paper ballot.
Electronic Transmission of Proxies: As the law previously existed, it did not allow for proxies to be submitted electronically (scanned, faxed, e-mailed, etc.). The new law contains language similar to the language already found in Florida Statute 607.0722(10), which governs for-profit corporations, and is being added to Florida Statute 617.0721, which governs not-for-profit corporations, including both condominium and homeowners’ associations. This new law will allow for owners to submit their proxies electronically, which will certainly facilitate membership voting by making it easier to participate (albeit participation by non-participation since its by proxy!).
Electronic Notice to Owners: This part of the bill removes from the statutes the requirement that electronic notices to owners must be authorized by the bylaws (this requirement generally meant an amendment of the bylaws was necessary since many were recorded back when the Internet was merely just a dream of the U.S. Army, Al Gore, Bill Gates or whomever else claims to have invented it and electronic notice was not even contemplated!). Now, as long as the owner consents in writing, the association may provide the owner with electronic notice and save some trees.
Suspension of Voting Rights and Amenities: A welcomed change and clarification adopted by this bill is that when an owner’s voting rights are suspended, they are effectively removed from the total number of voting interests in the community for purposes of calculating a quorum or obtaining approval of membership action. Basically, they are removed from the denominator of the fraction. So if you have a community of 100 units and need 67% to vote in favor of the proposed action, and 10 owners have had their rights suspended, you need only 67% of 90 rather than 67% of 100. The bill also clarifies that the suspension of right to use amenities applies to owner, their tenants and guests, regardless of number of units owned by the owner.
Fines: This section of the bill clarifies that it is the Board of Directors that is responsible for levying fines and that the fining/covenant enforcement committee hearing must be impartial and limited to the purpose of approving or rejecting the fine levied by the Board. This is a change I find to be somewhat poorly conceived as it 1) takes away significant authority from the committee and places further burden on the Board and 2) is a somewhat poorly worded amendment to existing law confounding whether the fine is to be determined by the Board and then approved or rejected by the committee after the fact, at a subsequent fining hearing, or if the hearing takes place first and then the fine is levied.
CONDOMINIUM ASSOCIATIONS ONLY:
Application of Payment/Assessments: The Condominium Act sets forth that any payments received by owners on a delinquent account are applied first to interest, then late fees, then collections costs and attorney’s fees, and lastly, the unpaid assessments. The bill amends Florida Statute 718.116(3) to reinforce that this application of payments is to be followed regardless of any purported “full accord and satisfaction” or “payment in full” language or any other restrictive endorsement that may accompany a short or partial payment tendered to the association.
The reason for this change is to overrule a 2014 appellate decision (referred to as the St. Croix case) that held that if a check was tendered for less than the total amount owed, but was accompanied by any of the “full accord and satisfaction” or “payment in full” language, the acceptance of the payment essentially settled the account for the amount accepted. This caused associations, their managers and attorneys to have to be overly cautious when processing each and every payment to make sure they were not waiving any amounts rightfully owed and even to turn away certain payments, but now that fear has been allayed, at least as to condominiums.
What I would like to see clarified is the last part of the statutory application. The last item to which payments are applied are unpaid assessments but the question remains, to which unpaid assessments are those payments applied, the oldest or the most recent? It would make sense to apply payments to the oldest unpaid assessments first and that is often how they are handled in practice as it is most fair to the delinquent owner (since the older an assessment, the larger amount of interest that accrues). However, it would be nice to have a clarification. Just wishful thinking on the part of an association lawyer.
Official Records: Previously, the Condominium Act had a catch-all type of provision that made “all other records of the association…which are related to the operation of the association” part of the official records. The new law clarifies that those “other” records are limited to only “written” records. Effectively, items such as audio or video recordings of meetings or security camera video footage are now no longer considered “official records” and accordingly, do not have to be made available to owners seeking to inspect the official records. An interesting debate is whether e-mail constitutes a “written” record and if so, whether audio or video files transmitted via e-mail are then made part of the official records.
Distressed Condominium Relief Act: The bill also extended the “distressed condominium relief act” also known as the “bulk buyer law” until July 1, 2018. It had been set to expire, or “sunset” on July 1, 2016. This is important for investors that buy distressed condominium projects as it gives them immunity from various obligations affiliated with being a developer.
Insurance: The new law modified a provision that previously made the association responsible for certain “uninsured losses.” This change really just fixes a glitch and clarifies that the association’s obligation to subsidize insurance shortfalls for items that may otherwise be the unit owner’s responsibility is limited to situations where the association was actually responsible to insure the damaged element.
HOMEOWNERS ASSOCIATIONS ONLY:
Homeowners Association Act: Florida Statute 720, which governs homeowners association, is now officially known as the “Homeowners Association Act.” Neat.
Governing Documents Includes Rules and Regulations: While most everyone has always considered the rules and regulations adopted by an association to be part of their “governing documents,” that term, as used throughout the Homeowners Association Act (my first time calling the statute by its new official name…exciting stuff!) is now deemed to explicitly include the rules and regulations.
Notice of Amendments: While the Homeowners Association Act still requires the providing of notice to the membership of recording an amendment to the governing documents, failure to do so does not affect the validity of the amendment.
Eligibility for the Board of Directors: Taking a page out of the Condominium Act, the Homeowners Association Act now provides that an individual who is delinquent in the payment of any financial obligation owed to the Association as of the last day that he or she could nominate himself or herself to the board is not eligible to be a candidate and may not be listed on the ballot. Once on the Board, a member’s delinquency leash is a bit looser (so as not to create excessive vacancies) as it is not until they become 90 days delinquent in the payment of any monetary obligation owed to the Association that they are deemed to have abandoned their seat on the Board, creating a vacancy to be filled accordingly.
OTHER BILLS AFFECTING ASSOCIATIONS:
Evicting Tenants of Properties in Foreclosure: HB 779 is meant to replace the Protecting Tenants in Foreclosure Act of 2009. Once a property is acquired at foreclosure, the new owner, whether a lender or third party purchaser, must provide a bona fide tenant (someone who was leasing at arm’s length, at a market rate) with only 30 days’ notice of the termination of the rental agreement before eviction can be pursued (if the tenant does not timely vacate). This is a much shortened window of time for tenants to vacate as compared to the prior Protecting Tenants at Foreclosure Act of 2009 which provided that a bona fide tenant was allowed to stay in the property for the entire remaining term of their lease unless the new owner wanted to actually reside at the purchased property.
Termination of Condominiums: Since this is not something that commonly comes up with condominium associations, thankfully, I will only mention that the Condominium Act now provides that if a termination vote fails, another vote to terminate may not be considered for 18 months and voting interests that have been suspended are still entitled to vote on the termination. Also, a termination vote may not take place until 5 years after the recording of the declaration of condominium unless there is no objection.