We often get asked by board members, officers and managers of community associations whether their association can charge a capital contribution fee to new owners or charge a fee for processing unit sales and lease applications.
The laws pertaining to such fees are quite restrictive for condominium associations while the laws for such fees in homeowners’ associations allow for generous collection of such fees.
For condominium associations, you can only charge fees to owners and tenants in amounts that have specifically been approved by the Ssate Legislature as evidenced in Chapter 718, Florida Statutes. However, in homeowners’ associations you can pretty much charge whatever amount of fee you want as long as the fee is set forth within your declaration of covenants.
When it comes to charging new purchasers a capital contribution in condominium associations, developers can charge such fees to original purchasers. Once turnover has occurred, the condominium associations can no longer charge such fees as Chapter 718 does not provide for allowing such capital contribution fees to be charged after turnover.
Capital contributions are a fixed sum of money new purchasers in condominiums usually have to pay at closing that go into the association coffers so that there is some money in the association operating account at turnover when the developer leaves. Usually the capital contribution fee is anywhere from one month up to one quarter of the association’s annual assessment amount.
For homeowners’ associations, Chapter 720 does not prohibit capital contribution fees from being charged after turnover from the developer. Therefore, a homeowners’ association can charge a capital contribution fee at the approval of all closings after turnover if the fee is contained in the governing documents. We have seen such fees in homeowners’ associations run from $500 to $5,000.
To see what a condominium association can charge for processing a lease or sales application, Section 718.112(2)(i), Florida Statutes provides that: “No charge shall be made by the association or any body thereof in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws. Any such fee may be preset, but in no event may such fee exceed $100 per applicant other than husband/wife or parent/dependent child, which are considered one applicant. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, no charge shall be made.”
In homeowners’ associations, Chapter 720 does not prohibit or limit such transfer fees to $100. Thus, a homeowners’ association can charge whatever transfer fee it wants as long as such fee and association transfer approval processing powers and procedures are contained in the neighborhood’s declaration of covenants.
In recap, a condominium association can only charge fees which are permitted by Chapter 718, while a homeowners’ association (governed by Chapter 720) can charge pretty much whatever fees it wants as long as such fees are contained in its governing documents.
In condominiums, people live close together, so over the years, the State Legislature has decided through Chapter 718 that there should be lots of rules, restrictions, and controls the condominium associations must conform to (more like living in a big city).
In contrast, because homeowners live father apart, the Legislature has decided that there is not the need for as many controls governing homeowners’ associations in Chapter 720 (more like living in a small town).