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2022 LEGISLATIVE UPDATE

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

561-288-3999

danw@wassersteinpa.com

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.

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.

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.

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!

Wasserstein, P.A. – 2015 Legislative Update

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561-288-3999

danw@wassersteinpa.com

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.

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

Legislative Changes when a Board Rearranges

legislature

This legislative session was a busy one as far as condominiums and homeowners associations are concerned.  This article will focus  on new responsibilities impacting the board of directors for homeowners associations.

For new members on each and every HOA Board of Directors, including those directors who are re-elected or re-appointed, there is now a requirement that each individual provide a written certification to the Association stating that he or she has read the governing documents in full, will uphold the rules and discharge their duties faithfully.  One would think that these are assumed responsibilities that naturally go along with the position, right?  Well, for those who are disinclined to provide such a certification because they would like to obtain a more complete understanding of their role as a board member, or simply because they hate reading or certifying in writing that they will be good boys and girls there is an alternative!  Instead of signing such a certification, the new board member is allowed to provide the Association with a certificate from a DBPR-approved provider of educational services reflecting that the individual has successfully completed a board member curriculum either 1 year before or within 90 days after their election or appointment.  Either way, these certifications are additional paperwork that the Association must keep on file as an Association business record, which by the way, can now be obtained by Association members using new technology such as their smart phone, tablet, portable scanner, etc. (this ability to use electronic media applies to condominium associations as well).

Staying on the topic of board members and HOA elections, the Association is no longer mandated to accept nominations to the Board at the election meeting or to even have an election for that matter (if there are less candidates then open seats on the Board).  However, to avail itself of these changes, the Association must have a procedure in its governing documents specifically allowing for advance nomination of candidates.  If your Association’s governing documents do not have such a procedure, you may want to seek legal assistance from an attorney to amend the relevant provisions (see: shameless self-promotion).

Now that the board of directors is in place and each member is properly certified, what are some other legislative changes that they should know about?  Well, one new requirement is that every HOA is now obligated to report to the DBPR some basic information on or before November 22, 2013.  The required information includes the name of the Association, the FEIN tax id number, the mailing and physical address, the number of parcels, and the total amount of annual revenues and expenses from the annual budget.  No big deal, just make sure to get it done!

Another important change is the requirement that all HOAs have a policy of insurance or a fidelity bond to cover misappropriated funds.  The limits of the insurance policy or the amount of the bond must be equal to maximum amount of funds that will be in the hands of the Association or its management company at any given time and must cover anyone who can control or disburse Association funds.  However, unlike condominiums, HOAs are allowed to waive this requirement annually if the majority of the members present at a meeting at which this requirement will be discussed vote in favor of waiver.

Finally, both HOAs and condominium associations now have the option of publishing a directory of all unit owners to the community.  The directory includes names, parcel addresses and phone numbers.  A unit owner may only avoid inclusion of their phone number by providing a written request to the Association that their number not be disclosed.  Of course, it is advisable that the Association send out advance notice if it intends to create and distribute such a directory advising owners of the opt-out option with regard to phone numbers and giving ample time for owners to provide such.  This is a certainly a scenario where the adage that it is easier to ask for forgiveness than permission should not be applied.

While there were certainly other changes applicable to both homeowners and condominium association in this year’s legislative session, those will be discussed in future articles, or you can feel free to contact me to discuss.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999