Condominium and homeowners’ associations, that have been around for a while, usually at some point want to upgrade their common elements or common areas to stay up with the times.

That 90’s paint color scheme of the buildings is no longer in fashion, pavers are now preferred over asphalt in the parking and roadway areas, or that social room carpeting needs to go and be replaced with low maintenance tile. Such upgrades are considered material alterations under the law and may require a membership vote.

A material alteration is a change in the look or function of the item being upgraded. Typically, if you are changing out association “personal property” that is not attached to the “real property” land or building, you do not need a membership vote and just the board can decide. This would include changing out the chairs, table, lamps and ashtrays in a social room.

However, if you are changing part of the building (paint color-inside or out), or attached property such as carpeting, tile, window coverings or other attached fixtures, you made need a membership vote to do so.

In a homeowners’ association, the answer as to what vote is required to make a material alteration is usually pretty straight forward as its governing documents normally require only the board or architectural review committee (ARC) approval for such alterations.

However, determining whether a membership vote will be required in condominium associations can be more complicated. Section 718.113(2)(a) Florida Statutes provides that: “there shall be no material alteration or substantial additions to the common elements or to real property which is association property, except in a manner provided in the declaration as originally recorded or as amended under the procedures provided therein. If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of the material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions.”

Many original developer-drafted documents are silent on this issue so 75 percent approval of the membership will be required. As this is a very high hurdle to obtain, many associations will amend their documents to require say 75 percent or 66 ⅔ percent of only those who vote will be required to approve material alterations and only for alterations over a certain dollar amount say $30,000 to $50,000. This allows the condominium board to approve less expensive alterations but will require the board to go to the members for proposed high dollar changes.

Some think that minor changes in paint color of buildings do not need a membership vote, but a court in Florida has held that even going from white to beige is considered a material alteration requiring in membership vote. There are some noted exceptions Florida courts have found that do not require a membership vote for material alterations.

These include alterations or modifications that are incidental to the repair, preservation or replacement of existing improvements, such as installing a new sea wall to protect the property or if an engineer finds the alteration is a better replacement for longevity and protection of the property, such as replacing river rock with tile, replacing asphalt with pavers or replacing real cedar shake roof shingles with faux shake shingles.

As you can see, there are nuances when it comes to which material alterations require membership votes and which do not. So, if you are not sure, you should check with legal counsel before entering into contracts for such alterations or upgrades to avoid running the risk of having to spend the same amount of money twice to convert the material alteration back to the old look if you are successfully challenged for not obtaining a membership vote first when you should have.

Rob Samouce, a principal attorney in the Naples law firm of Samouce & Gal, P.A., concentrates his practice in the areas of community associations including condominium, cooperative and homeowners’ associations, real estate transactions, closings and related mortgage law, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

Last year the Florida Legislature was silent when it came to passing any laws affecting community associations. Not this year.

This year four bills were approved and signed by the governor and one was vetoed. SB 398 applies to condos, cooperatives and HOAs and prescribes a “form” for estoppels certificates. We discussed that bill last month.

This month we will look at HB 1237 affecting condominium associations only, and HB 6027, which puts all associations (condos, cooperatives and HOAs) on equal footing so that required yearly financial reports are based upon total income of associations and the 50-unit financial reporting exception is removed.

SB 1520 tweaks how condominiums can be terminated. As terminations rarely happen, we won’t get into discussing SB 1520.

These new laws became effective July 1, 2017.

HB 1237, called the “Miami-Dade Grand Jury Bill” was the result of a Grand Jury Report filed by the Miami-Dade Grand Jury last February in reaction to a “parade of horribles” dealing with some large condominium associations in Miami. It is intended to get at supposed widespread criminality, fraud and abuse apparently seen only in Miami. However, the whole state now gets to suffer the arguably ill-written law resulting from the bad facts coming out of Miami.

For condominium associations only, HB 1237 now says:

Condominium fraud. Committing fraud and taking kick-backs in a condominium association is now a crime in Florida instead of just a civil infraction. Forgery of a ballot envelope or voting certificate used in condominium elections is now punishable as a felony in the third degree as is theft or embezzlement of association funds, destruction of, or the refusal to allow inspection or copying of an official record accessible to unit owners in furtherance of any crime is considered tampering with physical evidence.

If an officer or director is charged by information or indictment with a crime, he or she must be removed from office. While the charge is pending, the person may not be appointed or elected or have access to the official records. If the charges are resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term of office, if any remains.

Association attorney cannot represent management. To prevent conflicts of interest between associations and their management companies, it has now specifically been stated that an association may not hire an attorney who represents the management company of the association.

Purchases at foreclosure sales. To prevent another possible conflict of interest, a board member, manager or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure.

Official records. Bids for material, equipment or services are not listed as official records of the association and members may now designate an authorized representative to obtain copies of association records and unit renters have a right to inspect and copy the association’s bylaws and rules.

Large associations – website. It appears all associations with 150 or more units must have a website established by July 1, 2018. The following documents must be posted on the website: Association’s governing documents (declaration, articles, bylaws, house rules and amendments), management and other agreements, budgets and financial reports, director certifications and in lieu of other forms of providing notice of meetings, notices of meeting may be given by posting on the website.

Financial reporting. Associations of fewer than 50 units are no longer exempt from the financial reporting requirements of larger associations. If an owner requests a copy of the most recent financial report and is denied, the owner can notify the Division of Condominiums in Tallahassee, who can then remove the right to waive a more expensive financial report if the association fails to provide the requested report to the owner after notice. In HB 6027, the exemption for associations of fewer than 50 units in cooperatives and HOAs has also been removed. In addition, per HB 6027 for condos and cooperatives, the limitation that associations could not waive the financial reporting requirements for more than three (3) consecutive years has been removed so condo, cooperatives and HOAs can all now waive financial reporting requirements each and every year if they wish.

Debit cards: Association officers, directors, employees and agents may not use a debit card issued to an association for the payment of association expenses, and if such persons use such a card for any expenses that are not a lawful obligation of the association, they may be prosecuted as credit card fraud. Looks like no way to have an association debit card. Apparently an association credit card is still OK.

Board of directors term limits, recall. Now going forward from July 1, 2017, a director cannot serve on the board for more than four (4) consecutive two-year terms unless the term limit is waived by at least two-thirds of the total voting interests or there are not enough eligible candidates to fill the board positions. Any board service before July 2, 2017 should not count towards the new term limits. The bill also eliminates board certification of a vote to recall board members. So a board member being recalled cannot dispute the recall prior to removal but would need to contest by petition to the Division after recall and perhaps replacement and apparently at his or her own expense.

Conflicts of interest. There are extensive new provisions dealing with conflicts of interest. However, some of the provisions conflict with each other. One provision prohibits contracts with service providers if such a provider has a financial relationship with a director or officer or someone related to the director by blood or marriage. However, another provision appears to permit such contracts if the conflict is disclosed, the director recuses himself or herself on the voting for such contract and the board then approves the contract.

Arbitration: There are new certification requirements by the Division of Florida Condominiums, Timeshare, and Mobile Homes for arbitrators and new time limits in the arbitration process apparently to speed up arbitrations.

Voting rights. In order to suspend voting rights of an owner, in addition to the owner being at least 90 days delinquent in assessments, the delinquency must now be more than $1,000 and a 30-day notice must be given to the member before the suspension takes effect. A receiver of a unit cannot exercise voting rights now.

Financial institution reporting. Condominium associations are now required to report to the Department of Business and Professional Regulation an annual report containing the names of all of the financial institutions with which it maintains accounts and any association member can get a copy of the report from the department.

Rob Samouce, a principal attorney in the Naples law firm of Samouce & Gal, P.A., concentrates his practice in the areas of community associations including condominium, cooperative and homeowners’ associations, real estate transactions, closings and related mortgage law, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

This is the time of year when most condominium and homeowner associations have their annual meeting. When there is something to vote on, such as amending the governing documents, approving a property enhancement project, or waiving the annual audit, proxies are sent to the owners so that the requisite vote can be obtained to approve the amendments or alteration project or to save money by waiving the audit.

What many associations face at the meeting is the apathy of owners, who will not be at the meeting and also fail to mail in their proxy, resulting in a lot of owners views not being heard. Usually it is not an intentional act for owners to not send in their proxy. Rarely is the reason they did not send their proxy in is because they are against the questions being asked. Usually they don’t believe their vote is really needed or they just forget to send in their vote.

Many owners, who regularly invest in company stocks and bonds, get proxies from their invested companies all the time and lots of those proxies go to the circular file rather than being completed and sent back to the company. The same thing seems to happen with community association proxies.

If an amendment to the governing documents went out with the annual meeting documents, a lot of time, effort and consideration went into preparing the amendment by the board or a committee and the association’s attorney. The amendment may have been requested by a lot of owners or the board believed the owners would want to consider the amendment.

If proxy questions were included to waive the annual audit or roll over any excess funds, and if the requisite approval of those questions is obtained, then the association will save a lot of money in CPA expenses and possibly in taxes.

So you have good things that will probably result from obtaining the necessary approval of proxy questions, but many times these good things will not happen because not enough proxies are returned because of apathy.

In order to avoid this downside of not obtaining enough “yes” proxy votes, we suggest that associations form a committee to get the vote out. They should open the proxies as they are returned. A few days before the meeting, they should get on the phone or email owners, who have not yet sent in the proxy and ask them to do so. Owners can email or fax back copies of their signed proxies and the copies can be counted the same as the originals.

If you get to the meeting and such a committee was not formed, and therefore the requisite number of “yes” proxies was not obtained before the meeting, there is still a way to salvage the time and effort that went into the proxy votes.

At the meeting, it should be noted that many owners did not have the chance to vote yet, and that in order to give the chance to chime in on the proxy questions, the meeting should be adjourned to be reconvened at a date, time and place (within 90 days) for the purpose of the proxy votes only. If the date, time and place for the reconvened meeting is specified at the meeting, then no additional notice of the reconvened meeting, neither mailed nor posted, is required.

The remaining agenda items can then be addressed in the normal course of business at the original meeting.

Once the reconvened meeting date has been set, a committee can be formed to get the vote out so that enough approval votes will be in hand at the reconvened meeting for the questions to pass.

Rob Samouce, a principal attorney in the Naples law firm of Samouce & Gal, P.A., concentrates his practice in the areas of community associations including condominium, cooperative and homeowners’ associations, real estate transactions, closings and related mortgage law, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

When condominium and homeowners associations want to enter into new contracts with vendors or professionals for various projects or duties, there is a misconception that the association must get at least three (3) competitive bids before hiring the vendor or professional. This is definitely not the case.

For condominiums, Section 718.302, Florida Statutes, provides that: “If a contract for the purchase, lease or renting of materials or equipment, or for the provisions of services, requires payment by the association on behalf of any condominium operated by the association in the aggregate that exceeds 5 percent of the total annual budget of the association, including reserves, the association shall obtain competitive bids for the materials, equipment or services. Nothing contained herein shall be construed to require the association to accept the lowest bid.”

However, the statute goes on to say that: “Notwithstanding the foregoing, contracts with employees of the association, and contracts for attorney, accountant, architect, community association manager, timeshare management firm, engineering and landscape architect services are not subject to the provisions of this section.”

The reason you do not need to get competitive bids with these professionals is because you cannot compare their services apples to apples. How these professionals provide their services is unique to each, so getting competitive bids is not a good way to compare their services.

However, for other types of services that exceed 5 percent of the total annual budget of the association, including reserves, such as landscaping, bulk cable or hiring a building contractor or providing the materials for an expensive building project, it makes sense to require competitive bids as many contractors can provide the same service or materials at different prices.

There are exceptions in Section 718.3026, Florida Statutes, to having to obtain competitive bids when usually required including obtaining needed products or services in an emergency (after a hurricane for example) or if there is only one business entity that serves the association within the county as the source of supply. Also, there is nothing in the statute requiring an association to get at least three (3) bids; getting only two (2) competitive bids is all that is required.

For homeowners associations (HOAs), Section 720.3055 puts the magic percentage, which requires competitive bids at 10 percent of the total annual association budget, including reserves. If a contract was awarded under competitive bids, any renewal of the contract is not subject to competitive bids “if the contract contains a provision that allows the board to cancel the contract on 30 days’ notice.”

An additional twist for HOAs is, that although competitive bids are not required for the same professionals as in condos, including community association managers if an HOA does use competitive bids for contracting with a manager, the contract can be made for up to three years. The same emergency and sole source of supply within the county exceptions available to condos also apply to HOAs.

Last, it should be pointed out that for both condos and HOAs, all contracts for the provision of services and all contracts that are for the purchase, lease or renting of materials or equipment that are not to be fully performed within one (1) year, must be in writing.