Part 1 of Three-Part Series Community Association 2017 Legislative Update

This year ,the four most important bills affecting community associations are Senate Bill 398, House Bill 653, House Bill 1237; Senate Bill 1520, and HB 6027. In this article the focus will be on Senate Bill 398 (Estoppel Bill) which has passed and was not vetoed by Governor Rick Scott. The below article will focus on Senate Bill 398.

ESTOPPEL CERTIFICATES — SB 398

Please Note, Governor Rick Scott signed the bill on June 14, 2017, amending Chapters 718 (condominiums), 719 (cooperatives), and 720 (homeowners’ associations) effective on July 1, 2017. Associations should be prepared to properly respond to requests for an estoppel certificate under the new law. An estoppel certificate is a document, on paper or electronic, sometimes called an estoppel letter. The buyer of, or mortgage lender for, a parcel requests the letter/certificate to confirm the amount owed to the community association, and requests identification of the next regular and special assessment levied and due. These letters/certificates are necessary and important in the scenario of a sale or refinance.

The preparation and issuance of estoppel certificates by Florida condominium, homeowners’ and cooperative associations, governed respectively by Chapters 718, 719 and 720 Florida Statutes, has been considerably amended.

Notice. Estoppel requests may be communicated by an owner, mortgage holder or either of their designees. Communication can be in writing or by email. The Association’s website must identify the name of the person or entity designated to receive estoppel certificate requests, together with the street or e-mail address for receipt. It is important that Association’s create a dedicated email addresses for such estoppel requests, and policies as to how requests are handled upon receipt, so that requests are not missed and the responses are consistent with the law and all owners.

Response. Within ten days of a request an estoppel certificate must be delivered to the requestor on the date issued by hand delivery, United States Postal Service regular mail, or e-mail.

Who: The Association may be bound by an estoppel certificate issued by any: Association director, authorized agent or representative; and, any management company employee, authorized representative authorized agent. Associations should consider policies limiting who communicates information.

Contents. Estoppel certificates must contain, in addition to the date of issuance, unit/parcel owner name, unit/parcel number of the requesting owner, regular assessment amount, paid through date and next installment, the following:

  • Parking space or garage number.
  • Fee for certificate.
  • Name of requester.
  • If there is a delinquent amount the name and contact information of the attorney handling.
  • If monies are due on the date of issuance, an itemization of all amounts due together with amounts coming due through the effective date of the certificate.
  • Additional assessments and other monies scheduled to be due within the effective period of the certificate.
  • Capital contribution requirements.
  • Use restriction violations noticed to the owner.
  • Transfer approval requirements, and,
  • Association insurance contact information.
  • Officer or authorized agent signature.

Associations will want to gather the general information now, and enact a process to regularly update, and provide the information to counsel, as well as determine how to gather unit specific information, such as violation information.

Effective Date. An estoppel certificate is to have effective period of 30 days if sent by e-mail and 35 days if sent by regular mail. Associations will want to ensure that the certificate includes all future accruing items within those deadlines.

Fees. If a fee is charged, then the Board of Directors must adopt a resolution in writing authorizing the collection of a fee which may not exceed:

  • Base: $250.00 if no delinquent amounts are due to the Association.
  • Timing: An additional $100.00, for a three day expedited period.
  • Delinquency: An additional $150.00, if there is a delinquent amount is owed.

These amounts are to be adjusted every five years in the same manner as the Consumer Price Index changes. Multiple units from the same seller have additional limitations. No preparation fees may be charged: if a certificate is not provided within 10 business days of the request; nor, for an amended certificate. An association must have an authorizing resolution or written contract adopted by July 1, 2017.

Reimbursement. The statutory right to a non-payor owner to be reimbursed the certificate fee if a sale or mortgage of a unit does not close within thirty days after the anticipated closing date cannot be waived. If there is litigation over the right to reimbursement, the prevailing party is entitled to attorney’s fees and costs.

Binding authority. The Association will be bound in most instances by the information contained in the certificate.

Liens for Interior Designs

Section 713.79 provides:

“Liens for interior design services.—Any person who, as part of his or her services performed as an interior designer, furnishes any articles of furniture, including, but not limited to, desks, tables, lamps, area rugs, wall hangings, photographs, paintings or other works of art, or any items of furnishing, subject to compliance with and the limitations imposed by this part, shall have a lien upon all such articles furnished and upon all such articles manufactured or converted from such furnishing, provided that the same shall be tangible personal property and provided further that such furnishings are rendered in accordance with a written contract and under direct contract with the owner.”

 

 

Important Update for CAMs

For CAMs — An important development pursuant to the passing of Housr Bill 1237:

Under 718.111 (1) as amended by HB 1237, if a lawyer buys a cup of coffee or lunch for a CAM and it’s not in the context of an education program (undefined) or trade fair (undefined), the CAM is subject to a civil penalty.

Questions on HOA/COA law? Give us a call (386) 310-7997 or visit http://daytonabusinesslawyers.com/contact/ to request a consultation.

 

According to Law, the Official Records an Association Must Keep

Section 718.111(12), of the Florida Condominium Act, outlines the official records the association must keep. The statute outlines a number of specific items that must be maintained by the association, including copies of the governing documents, account histories for each unit owner, and the insurance policies for the association, for example.

In addition, the statute also includes a “catch all” provision, which states “all other written records of the association not specifically included in the foregoing which relate to the operation of the association.”

Additionally, Section 718.111(12)(c), states that the official records of the association are open to the inspection and copying by any member of the association or their authorized representative. Certain records are not open to inspection.

These records include attorney client privileged information, information obtained in connection with the approval of a sale or lease, certain personnel records of the association’s employees or management company employees, medical records, protected personal information, which includes social security numbers, driver’s license numbers, credit card numbers, email addresses, telephone numbers and other personal information of unit owners, and electronic security measures such as passwords, software or operating systems used by the Association.

 

Violating Architectural Rules & Regulations Can Get Expensive

Most association’s Governing Documents require that the Association must review construction plans/permits and then issue written consent for construction of improvements or modifications to properties – especially if those improvements or modifications will be visible to other owners, involve the common elements or association property and/or impact utility services to the property.

Therefore, single-family homeowners give up freedoms they might have otherwise enjoyed if they did not live in a planned community.

However, the purpose of restrictions is to protect the common good. Nevertheless, often, property owners negligently and purposefully ignore the architectural control provisions of the governing documents. When timely and consistent enforcement action is taken by the Association against an owner who has made unapproved changes, the appropriate remedy awarded by the court is a mandatory injunction. The courts have broad discretion to fashion an appropriate remedy but usually a court’s order requires the offending owner to remove unauthorized changes and to restore the original condition of the property.

In several cases, the courts have required removal of balcony enclosures, storm shutters, decorative features, fences, patios, landscaping and newly painted colors.

Some examples of common violations are as follows:

  • A homeowner thought that since he obtained a permit for the installation, HOA approval was necessary – not true.
  • Another homeowner thought that since the HOA didn’t own the property underneath the dock that HOA approval was not necessary – not true.
  • Another homeowner thought that approval by the Environmental Protection Agency (EPA) overruled the HOA – not true.

Property Owners need to be cognizant of Section 720.3035, Florida Statutes, which became effective on July 1, 2007. This law does not eliminate an association’s ability to regulate alterations to a lot but does require that authority be specifically stated or reasonably inferred from the written covenants or other published guidelines and standards authorized by the declaration of covenants. Home or Unit Owners need to learn and understand what procedures are in place in their community association to avoid costly problems.

 

 

 

Reserves and Their Necessity

While operating costs require monitoring, obtaining competitive bids, etc., it is the major replacements and projects that can overwhelm community finances. Reserves are by far the best way to pay these major expenses. A big mistake some communities make is by waiving reserves and therefore the money for future projects are not being accumulated over time.

Future owners, including some current owners, will have a special assessment or require a bank loan when the associate needs a lump sum of all cash at once. In my opinion, not funding reserves is a bad idea because it’s a shock to owners when the only way to pay is a special assessment or a bank loan, which in most cases cause the project to cost more than it should.

New boards should understand their responsibility to maintain and preserve their communities for the benefit of current and future owners. Reserves are not for “future” expenses. Instead, they are for the portion of wear and tear on the common elements that our communities experience each day.

Providing adequate reserves will help secure the financial health of any community, fulfill the fiduciary duty of the board and provide peace of mind for their homeowners.

New buyers have a keen eye and attention on reserves funding in communities and smart buyers are waiting to see reserves studies and financial information before buying because they do not want to pay more than their fair share or be stuck with a special assessment.

With adequate reserves, there is a smaller chance of work not being done.

 

Reserves and Their Necessity

While operating costs require monitoring, obtaining competitive bids, etc., it is the major replacements and projects that can overwhelm community finances. Reserves are by far the best way to pay these major expenses. A big mistake some communities make is by waiving reserves and therefore the money for future projects are not being accumulated over time.

Future owners- including some current owners, will have a special assessment or require a bank loan when the association needs a lump sum of cash all at once.

In My opinion, not funding reserves is a bad idea because it’s a shock to owners when the only way to pay is a special assessment or a bank loan, which in most cases cause the project to cost more than it should.

New boards should understand their responsibility to maintain and preserve their communities for the benefit of current and future owners. Reserves are not for “future” expenses. Instead, they are for the portion of wear and tear on the common elements that our communities experience each day.

Providing adequate reserves will help secure the financial health of any community, fulfill the fiduciary duty of the board and provide peace of mind for their homeowners.

New buyers have a keen eye and attention on reserves funding in communities and smart buyers are waiting to see reserves studies and financial information before buying because they do not want to pay more than their fair share or be stuck with a special assessment.

With adequate reserves, there is a smaller chance of work not being done.

How do you Know if your Board’s Rules are Real?

A large aspect of being an Association Board member is enforcing a variety of rules. Common rule enforcement includes limiting the number and types of pets in a unit, not allow short-term lease agreements, and limiting commercial activity. Although many of these restrictions are appropriate and the board has the power to enforce them, it is sometimes discovered that an “established” rule or restriction doesn’t exist. This is a situation in which boards are enforcing fake rules.

Sometimes, but not always, when boards are elected, new directors do not review the association’s declaration, bylaws, and rules (known as the governing documents) and regrettably, instead, rely on the practices of past boards.

What we eventually then see is that at some point an owner or occupant challenges the board’s action and requests that the board provide where and in what document this rule exists. If/when a board cannot establish the authority to enforce a certain restriction, it may inevitably be paying attorney’s fees and costs to the opposing party as well as seeing a steep decline in membership confidence.

Every board of directors would be well advised to undertake an annual rules and regulation audit to determine which restrictions are currently enforceable pursuant to the association’s governing documents as well as current law.

Violating Architectural Rules and Regulations Can Get Expensive:

Most association’s Governing Documents require that the Association must review construction plans/permits and then issue written consent for construction of improvements or modifications to properties – especially if those improvements or modifications will be visible to other owners, involve the common elements or association property and/or impact utility services to the property.

Therefore, Single-Family homeowners give up freedoms they might otherwise enjoy, if they did not live in a planned community. However, the purpose of the restrictions are to protect the common good. Nevertheless, often, property owners negligently and purposefully ignore the architectural control provisions of the governing documents.

When timely and consistent enforcement action is taken by the Association against an owner who has made unapproved changes, the appropriate remedy awarded by the court is a mandatory injunction. The courts have broad discretion to fashion an appropriate remedy, but usually a court’s order requires the offending owner to remove unauthorized changes and to restore the original condition of the property.

In several cases, the courts have required removal of balcony enclosures, storm shutters, decorative features, fences, patios, landscaping and newly painted colors. Some examples of common violations are as follows:

  • A homeowner thought that since he obtained a permit for the installation, HOA approval was not necessary – not true.
  • Another homeowner thought that since the HOA didn’t own the property underneath the dock that HOA approval was not necessary – not true.
  • Another homeowner thought that approval by the Environmental Protection Agency (EPA) overruled the HOA – not true.

Property Owners need to be cognizant of Section 720.3035, Florida Statutes, which became effective on July 1, 2007. This law does not eliminate an association’s ability to regulate alterations to a lot but does require that authority be specifically stated or reasonably inferred from the written covenants or other published guidelines and standards authorized by the declaration of covenants. Home or Unit Owners need to learn and understand what procedures are in place in their community association to avoid costly problems.

Condo Associations and What to Do with Rentals

For the New Year and the 2017 legislative session, community associations should be reviewing their current rental provisions and deciding whether to propose any amendments to address minimum rental terms.

If your association has a problem with short term rentals in the community and would like to adopt amendments to the governing documents to address those issues, the amendment should be approved and recorded as soon as possible.

For example, some governing documents require rentals to be for a minimum of 6 months, or 12 months, so that the residential nature of the community may be maintained.  The documents could also be amended to clarify that the listing of a property in the community on a hotel-lodging type site constitutes a violation in addition to the short-term occupancy being the violation.

In addition, there has been a bill filed, SB 188, that would prohibit local governments from adopting ordinances limiting the duration of vacation rentals. This bill would primarily impact community associations without minimum lease terms, as it will limit the ability of your local government to offer your association much help.

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