Condos and HOA's

New legislation affecting condos, co-ops and HOAs

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.