2017 Florida Legislative Update: Condominiums, Cooperatives, and Homeowners’ Associations
The following is a summary of new laws EFFECTIVE JULY 1, 2017, UNLESS SPECIFICALLY STATED OTHERWISE.
- Estoppel Certificates SB 398: Florida Statues 718.116 and 720.30851
An estoppel certificate is a document, on paper or electronic, sometimes called an estoppel letter. The buyer of, or mortgage lender for, a parcel traditionally seeks the certificate to confirm the amount owed to the association administering the community, and usually identifying the next regular and special assessment levied and due. These certificates are important because a sale or refinancing frequently will not occur if the letter is not available to confirm that the buyer or lender will not owe have to pay more money than expected.
The preparation and issuance of estoppel certificates by Florida condominium, homeowners’ and cooperative associations, governed respectively by Chapters 718, 719 and 720 Florida Statutes, is drastically changed. This Bill, amending Sections 718.116, 719.108, and 720.30851, mandates contents, effectiveness, timing, and refunds charges for estoppel certificates.
- Notice: Estoppel requests may be transmitted by an owner, mortgage holder or either of their designees. Transmittal may be in writing or electronically. 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. To avoid misplaced requests, An Association may desire to create dedicated email addresses for requests, and policies as to how requests are handled upon receipt.
Response: Within ten (10) 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.
Is there a right of first refusal provided to the members of the association.
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.
The max fee an association may charge when it receives simultaneous requests for estoppel certificates for multiple units or parcels owned by the same person and no past due monetary obligations owed to the association is as follows:
- For 25 or fewer units, $750
- For 26 to 50 units, $1,000.00
- For 51 to 100 units, $2,500
- 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.
- Financial Reporting HB 6027: Condominium, Cooperative, and Homeowners’ Associations, Florida Statues 718.111(13), 720.303(7) and 719.104(4)
- HB 6027 deletes the year-end financial reporting exemption for associations that operate fewer than 50 units or parcels. Under previous law, these associations were not required to prepare a year-end annual financial report based on revenues, but rather, could prepare a report of cash receipts and expenditures.
Now, all associations must prepare a financial report based on annual revenues, regardless of the number of units or parcels. As a reminder, the following thresholds are contained in the law:
- An association with total annual revenues of $150,000 or more, but less than $300,000, must prepare compiled financial statements.
- An association with total annual revenues of at least $300,000, but less than $500,000, must prepare reviewed financial statements.
- An association with total annual revenues of $500,000 or more shall prepare audited financial statements.
- An association with total annual revenues of less than $150,000 is only required to prepare a report of case receipts and expenditures.
Further, for condominium and cooperative associations, HB 6027 also deleted the limitation on the number of times an association can waive its financial reporting requirements. Previously, condominium and cooperative associations could not waive the statutorily required financial reports for more than three consecutive years.
This provision has now been deleted, although there is a bit of a glitch in the statutes since HB 6027 removed the provision, while HB 1237, which also amended these sections, left them intact. It remains to be seen how the official version of the Florida Statutes, which is due to be released in the next couple of months, will address this conflict.
Condominiums ONLY HB 1237: FLORIDA STATUES 718.111(1)
HB 1237 seeks to create many criminal and claim thresholds that will lead many Officers and Directors to confirm insurance coverage, procedures, and management. Many condominium associations will have to revise election and recording keeping, and create Internet webpages. This law applies only to Florida condominium associations, not to homeowners’ associations.
- Criminal Penalties:
Sections 718.111(1)(d), An officer, director, or manager may not solicit, offer to accept, or accept any thing or service of value or kickback for which consideration has not been provided for his or her own benefit or that of his or her immediate family. If applicable, a violation of this provision may result in criminal penalties as provided in Section 718.111(1)(d)
718.111(2)(a) and (d) create criminal penalties for a number of matters:
- Forgery of a ballot envelope used in an election is punishable as provided in Section 831.01;
- Forgery of a voting certificate used in an election is punishable as provided in Section 831.01;
- Theft or embezzlement of funds of a condo is punishable as a crime as provided in Section 812.014;
- Destruction of an official record or refusal to allow inspection or copying of an official record in furtherance of a crime is punishable as tampering with physical evidence as provided in Section 918.13 or Section or as obstruction of justice as provided in Chapter 843; and,
Practical Note: Charged, not convicted, requires removal from office and the vacancy is to be filled during the pending of the case and the accused being disqualified to serve until the charge is resolved. If there is no finding of guilt, then the accused is reinstated as a director, assuming there is a term remaining. Additionally, the removed Officer or Director may not have access to the official books and records of an association except pursuant to a Court Order.
Practical Note: the term “kickback” is not defined by the statute. It is very important that all associations have well-defined election procedures, official records retention and inspection rules, and secure and transparent financial procedures. IMPORTANT THAT ALL ASSOCIATIONS REVIEW THEIR INDEMNIFICATION PROVISIONS CONTAINED WITH THE GOVERNING DOCUMENTS WITH ASSOCIATION ATTORNEY AND INSURANCE AGENT/BROKER. WE MAY SEE A TREND TOWARD OVERLY AGGRESSIVE CRIMINAL PROSECUTIONS FOR SIMPLE MISTAKES – D&O COVERAGE USUALLY DOES NOT COVER CLAIMS FOR CRIMINAL CONDUCT!
- Conflict of Interests:
Legal Services: Section 718.111(3), prohibits a condominium association from hiring an attorney that represents that association’s management company. This law will require separate counsel management and an association when a claim is filed, it is anticipated that this change will increase insurance premiums.
Practical Note: Where both an association and the management company are sued for the same act, and there is an indemnity provision in the management contract, the attorney may be able to to serve as counsel to the management company in that action.
Unit Purchases: Section 718.111(9) will prohibit a condominium association’s officers and directors, managers and management companies from purchasing a unit in a condominium at that association’s lien foreclosure sale, or as a result of a deed in lieu of foreclosure, except for timeshares.
Practical Note: Loophole – the statue does not prohibit the above individuals or entities from forming a separate entity (llc or corporation) to purchase a unit a foreclosure sale.
Employment and/or Contracts with Service Providers: Section 718.112(2)(p) prohibits employment or a contract with condominium association service provider that is owned or operated by an officer or director or any person who has a financial relationship with a director or officer, or a close relative as defined, except if the ownership interest is less than 1%.
Practical Note: The term service provider is not defined. It is unclear whether the law was intended to apply to (handyman, receptionist, or other similar type of employee. The law also seems to directly conflict with Section 718.3027 (which appears to allow these type of contracts if approved by the BOD as set forth in Section 718.3027, Florida Statutes.
Management Limitations: Section 718.3025(5), prohibits a condominium association maintenance or management company, and directors and officers of those entities, from purchasing a unit in a condominium administered by the association at a lien assessment foreclosure sale or obtaining a deed in lieu of foreclosure. Management contracts may be canceled by majority of the unit owners other than the contracting party if the contracting party owns 50% of the unit.
Officer and Director Conflicts: Section 718.3027, regulates a condominium association directors and officers’ conflicts of interest, including disclosure of “any activity that may reasonably be construed to be a conflict of interest.” A rebuttable presumption of a conflict is created under certain circumstances, such as an officer, director or relative of either: entering into a contract with the association; or holds an interest in an entity conducting business with the association. A contract proposal that would generate a conflict must be stated on the contract. If the board of directors votes against a contract with a related entity, then the director must provide a written disclaimer of intent to pursue the matter or “withdraw from office.” Noncompliance results in an automatic removal from office creating a vacancy. If there is a conflict to be considered by the association’s board of directors, the director and a director’s relative with the conflict may attend and present to the board; however, after the presentation, the director and relative must leave the meeting.
Practical Note: The Statue suggests that an association may enter into a contract for good and services with a director if the conflict is disclosed and if the BOD votes in its favor. However, this section does conflict with Section 718.112(2)(p) (presented above) which completely prohibits that type of contract. It is unclear at this time which section of the statue will control with respect to service contracts entered into with BOD member or BOD member’s family.
- Records: Section 111(12) seeks to require bids to be kept as accounting recordsfor seven (7) years, rather than just one (1) year. Inspection of records is expanded to allow a member’s authorized representative to inspect. Renters will be able to review the association’s bylaws and rules. In addition to paper records, electronic records of voting are to be maintained for one (1) year.
- Websites for Official Records: Section 111(12)(g) BY JULY 1, 2018 it is mandated that condominium associations governing 150 or more units, excepting timeshares, must have an internet site, upon which shall be posted digital copies, protected or restricted information redacted before posting of the association’s:
- Governing documents including the rules and regulations;
- Management agreement;
- Leases and other contracts obligating the association or the unit owners;
- Annual budget and any proposed budget to be considered at a meeting;
- Financial report and any proposed financial report to be considered at a meeting;
- Certification of directors;
- All contracts or transactions between the association and any director, officer, corporation of the association;
- Certain contractor documents regarding a conflict of interest;
- Unit owner meeting notices, agendas and documents to be approved, no later than the 14 days before the meeting. The notice must be posted in plain view on the front page of the website, or on separate subpage of the website labeled “notices” which is conspicuously visible and linked from the front page. The association must also post on its website any document to bed considered and voted on by the owners during the meeting or any document listed on the agend at least 7 days before the meeting at which the document or the information within the document will be considered.
- Board of directors’ meeting notices and
- The Association shall ensure that the information and records described above, which are not permitted to be accessible to unit owners, are not posted or are redacted on the association’s website.
- Website must be: independent website wholly owned and operated by the association; accessible through the internet and can’t be accessible by the general public;
Practical Note: Website should be ready by July 1, 2018. Your Attorney should be able to work with you to develop a template.
If the association utilizes a management company to provide the association with a website (as many do) the management contract must specify that the website belongs to the association and can not be shut down by the management company.
The administration of the website is regulated, including access of usernames and passwords to unit owners. Notice of meetings on a website may be set by association rule in addition to notice otherwise required which must follow the statutory e-notice requirements.
- Financial Reporting:
Financial Statements: Section 718.111(13), rescinds the small association, less than 50 units, option to prepare a report of cash receipts and expenditures in lieu of financial statements. If financial statements are not provided to an owner within five (5) business days of a written request, and if the Division of Condominiums confirms that failure, then the Division is mandated to require the association to provide the report within the next five (5) business days. If the association fails to comply with the Division’s request, the association’s members may not waive a financial reporting requirement.
All associations large or small prepare financial statements now, based on revenue, unless waived in advance by the members.
Practical Note: In some cases this will need to be prepared by a cpa and will increase costs for the association that need to be budgeted.
Finances: Section 718.71, is created to require condominium associations to file an annual report with the Department of of Business and Professional Regulation (DBPR) including the names of the association’s financial institutions which report may be also be obtained by members from DBPR.
Debit Cards: Section 718.111(15) prohibits condominium associations from using debit cards, and if a debit card is utilized for a “not lawful obligation” the user may be prosecuted as credit card fraud per Section 817.61.
Practical Note: Credit Cards are permissable
- Term Limits/Elections: Section 112(2)(d), prohibits a condominium association director from serving more than four consecutive two-year terms unless: two-thirds of all voting interests approve, or there are not enough eligible candidates. This may lead to amendments rescinding staggered two-year terms.
Practical Note: There is no express prohibition on the length of time a director may serve one-year terms. Another issue is whether the the new law is intended to be applied retroactively or prospectively beginning with terms starting July 1, 2017. If applied prospectively then the prohibition would begin in 2025 if retroactively applied many of the terms may have terminated and/or expired.
- Recall: Section 112(2)(j) requires a recalled director to provide records and property within 10 business days after the vote. Assuming the Legislature did not intend for a properly elected director to be removed based upon an insufficient petition, for example not containing enough signatures, the changes would appear to push associations to file a lawsuit seeking a declaratory judgment because the recall arbitration process in the circumstances has been rescinded.
The statue no longer requires the Board to “certify” or “not to certify” the recall, but still makes reference to a board filed petition for recall arbitration.
Practical Note: This is a very confusing provision in the new law. The intent seems to be to make recalls effective immediately upon receipt of the recall petition by the board. The statue also requires that the individual board members who are recalled to file a petition for arbitration if they believe the recall to not be effective. Nevertheless, it is unclear whether the statue requires the board to accept the recall petition that on its face is invalid, or that is not properly executed/signed by a majority of the owners. This law will most likely lead to many legal issues.
- Arbitration: Section 1255(4) allows for private arbitrators, generally credentialed bar members don’t have to be employed by the division. An arbitrator under this provision must provide a hearing within 30 days of being assigned or entering into a contract unless the petition is withdrawn or a continuance is granted, and arbitration decisions shall be rendered within 30 days after the final hearing or suffer the cancellation of the arbitrator’s certification.
- Voting Suspension: Section 303(5) permits suspension of voting rights when an condominium unit owner’s monetary obligations to the condominium association are more than $1,000 and more than 90 days delinquent.
Proof of such monetary obligation must be provided to the unit owner or member 30 days before such suspension can be effective.
- Receivers: Section 303(8) prohibits a receiver from exercising unit voting rights when the a condominium unit is in receivership.
- Ombudsman: Section 5012(5) is expanded to allow the Condominium Ombudsman to review secret ballots cast at an association meeting.
- Condominium Termination SB 1520, Florida Statue 718.117
This change is to clarify existing law and are remedial in nature. Optional terminations are required to be approved by the Division of Condominiums. The Division’s examination to confirm procedural sufficiency shall be completed and reported to the petitioner within 45 days of receipt, and if not, then there is a presumption of acceptance. As part of the clarification process the law is stated to apply to all condominiums. The Division is provided a budget for hiring a full-time employee to assist in implementation. 80% of the voting interests may approve a plan of optional termination, regardless of what a condo’s governing documents may provide. However, if 5 % or more of the voting interests reject the plan of termination, the plan may not proceed. Previous law provided for 10% or more of the voting interests to reject the plan.
Some other important points:
- If rejected then a subsequent plan for termination may not be considered for 24 months.
- Optional Termination is not permitted until 5 years after the recording of the declaration of condo, unless there is no objection to the plan.
- In the event of optional termination, all persons whose condo unit is their homestead and who are current in the payment of both assessments and monetary obligations to the association must be paid at least the original purchase price paid for their units.
- HB 431(Fire Safety) became law July 1, 2016, amending Fla. Stat. §§633.202 633.208.
- Revised 633.202 and 633.208 with regard to certain structures located on agricultural property which are exempt from Florida Fire Prevention Code.
- Required that certain structures used for agritourism activity be classified.
- Provided criteria for such classifications; provided that certain structures are subject to annual inspection.
- Specified applicable fire prevention standards; required that State Fire Marshal adopt rules.
- Revised certain dimensions of tent that is exempt from code.
- Required that State Fire Marshal adopt rules; authorized local fire official to consider specified publication when identifying an alternative to fire safety code.
- HB 535 (Florida Building Code) became law July 1, 2016 468.609 and various sections of Ch. 489 and 553.
- Revised provisions related to Florida Building Code.
- Revised provisions regarding Florida Building Code Compliance and Mitigation Program.
- Restricted application of Florida Building Code for certain aspects of construction.
- Revised provisions related to portable pools.
- Revised provisions regarding Florida Homeowners’ Construction Recovery Fund.
- Revised minimum requirements for certificate of completion for residential swimming pools.
- Revised provisions regarding authority of building officials to issue building permits
- Revised provisions regarding appeal boards; revising provisions addressing certain fire service access elevators.
- Created task force to study electrical safety in swimming pools.
- Created construction industry workforce task force to study issues associated with training of construction workforce.
- HB 931 (Citizens Property Insurance) became law July 1, 2016 amending Fla. Stat. §627.351
- Clarified that a consumer representative appointed by the Governor to the Citizens Property Insurance Corporation’s board of governors is not prohibited from practicing in a certain profession if required or permitted by law or ordinance.
- Revised the requirements for licensed agents of the corporation
- Revised provisions related to the corporation’s use of certain public and private hurricane loss-projection models in establishing certain rates
- Revised a provision to permit specified information from certain underwriting and claims files to be made available to certain entities.
- Provided limitations for the use of such information by the entities, etc.
- HB 965 (Fire Safety) became law July 1, 2016
- Revised fire safety standards for assisted living facilities & provided exemption for certain assisted living facilities under certain conditions.
- State Fire Marshals are now authorized to use the most current edition of the National Fire Protection Association (NFPA) Life Safety Code, 101 and 101A, in determining the uniform safety fire code adopted for Assisted Living Facilities (ALFs).
- Amended Fla. Stat. §429.41, F.S., to repeal current fire safety requirements for ALFs that utilized previous editions of the NFPA Life Safety Code, including NFPA 101, 1994 edition.
- Permits ALFs that have a building permit or certificate of occupancy issued before July 1, 2016, to remain under the provisions of the 1994 and 1995 editions of the NFPA Life Safety Code. Such facilities may make repairs, modernizations, renovations, or additions to or rehabilitate the facility in compliance with the 1994 and 1995 editions, as applicable. A facility must comply with the current NFPA Life Safety Code if it underwent (or undergoes) a Level III building alteration or rehabilitation under the Florida Building Code or seeks to utilize features not authorized under the 1994 or 1995 editions.
- Removed the requirement that the Office of the State Fire Marshall provide specified training and education to the Agency for Health Care Administration employees and local government inspectors.
- Prohibits a local government or a utility from charging fees in excess of the actual expenses incurred in the installation and maintenance of an automatic fire sprinkler system in an existing ALF.
- SB 184 (Military and Veterans – Rentals) became law July 1, 2016 (creating Fla. Stat. §83.683)
- Provided that a landlord is required to process a rental application from a military servicemember within seven days of submission, if the landlord required an application before residing in a rental unit.
- Within that seven day period, the landlord must provide the servicemember with a response in writing of the approval or denial of their application and, if denied, the reason for denial.
- Should the landlord not provide a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are met.
- Applies in situations in which a servicemember seeks to rent a unit or parcel within the control of a condominium association, cooperative association, or homeowners’ association.
- SB 1174 (Community Residential Homes) became law July 1, 2016
- Provided details as to the applicability of sitting requirements for community residential homes and the applicability with respect to local land use and zoning, etc.
- Clarified the definition of a community residential home as being a home consisting of 7 to 14 unrelated residents who operate as the functional equivalent of a family, including such supervision and care by supportive staff as may be necessary to meet the physical, emotional, and social needs of the residents.
- A community residential home may not be constructed within a radius of 1,200 feet of another such home or within a radius of 500 feet of an area of single-family zoning.
- Similarly, a home of six or fewer residents which otherwise meets the definition of a community residential home may not be constructed within a radius of 1,000 feet of another such home.
- The law is silent as to which zoning requirement applies when determining the proper distance between a community residential home licensed for 7 to 14 residents and a home licensed for 6 or fewer residents which otherwise meets the definition of a community residential home.
- Required that a radius of 1,200 feet between a community residential home licensed for 7 to 14 residents and a home licensed for 6 or fewer residents which otherwise meets the definition of a community residential home.
- The amendment does not impact community residential homes already licensed and in operation prior to July 1, 2016.