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Special Assessments and SIRS/MIRS UPDATE

DBPR Panel – Part 2, February 29, 2024 

Attorney Kistemaker is a voting member of the Florida Bar Condominium & Planned Development Committee and as such, serves as Co-Chair of the Education Sub-Committee and additionally, serves on and the Senate Bill 4D/154 Substantive Legislative Committee Task Force and Board Certification Course Committee. 

Special Assessments

  1. How are special assessments handled at the time of closing? If the seller discloses special assessments properly, the parties must negotiate their payment method. They are negotiable as to who will pay them and should be noted on any purchase agreement – The seller may elect to pay the full amount due at closing, or the seller may pay prior to closing, and the buyer shall pay the amounts due after closing.
  1. What should a buyer look for to avoid getting hit with a special assessment as soon as they buy? Need to review condo rider and note they only have a 3 day right of rescission in the condo rider the special assessments that are contemplated must be identified in the disclosure – take note of any upcoming restoration projects and review the budget and reserves for the last year. Review minutes and agendas for the last year. 

SIRS and MIRS

  1. How important is the SIRS Reserve Study? It is mandatory so it is extremely critical for associations to comply with this law. The statute which is law now requires that each condo buildings 3 stories or higher must complete a SIRS at least every 10 years after the condo’s creation. Additionally, Associations must also have a Milestone Inspection by December 31 of the year in which the building reaches 30 years of age. (These are condo buildings 3 stories or higher)
  2. At this time, structural integrity reserve study is not very clear and open to see in most Associations. Advice for buyer? Review budget and ensure they have mandatory reserves for the sirs and they have at least hired the expert to perform the inspections – should be in the minutes. 

Estoppel FAQs

Attorney Kistemaker is a voting member of the Florida Bar Condominium & Planned Development Committee and as such, serves as Co-Chair of the Education Sub-Committee and additionally, serves on and the Senate Bill 4D/154 Substantive Legislative Committee Task Force and Board Certification Course Committee.

  1. What are the statutory estoppel requirements for a condo association?

An estoppel letter/certificate is used to facilitate a closing by providing a snapshot of the fees or assessments that a seller may owe to their association. Property owners who live within a community association must contact the association to get an estoppel letter when they sell their home or condominium unit (usually through title company or attorney).

The association is obligated by statute to provide an “estoppel certificate” within 10 working day of receipt of a written request. 

At closing assessments will be prorated per the estoppel and both the buyer and seller will contribute and pay (similar to taxes). 

If the title company does not verify the amount of assessments that may be due, the new owner becomes liable for all past due assessments and could then make a claim against the title insurance company for contribution.

When the association represents that a certain amount of money is due for a unit, the title company and the closing agent rely on that number in calculating the closing adjustments and issuing title insurance. In other words, when the association responds that a certain amount is due, it is “estopped” from later claiming some other amount is due, because the parties have relied upon the numbers provided. That is why it is important to be very careful in preparation of these documents, which under current law, also require the provision of additional information not related to assessments, such as if the if the property is in violation and the following items:

  • The monthly, annual or quarterly association dues; 
  • Any outstanding payments and fines;
  • The name of the management company or association that payments need to be made payable to;
  • Any parking space, storage unit, or dock space that comes with the unit;
  • Whether the subject condo unit or HOA property has any violations imposed against it;
  • The amount and frequency of any special assessments;
  • Whether the association has the right of first refusal;
  • Any transfer taxes or other fees that must be paid at closing;
  • Whether association approval is required and whether it has already been applied for; and
  • If there are any other associations that need to be contacted for an estoppel statement (such as a master association).

The Condominium Act, the Cooperative Act, and the Homeowners’ Association Act, all regulate the amount the associations can charge for “estoppel certificates.” Lawyers can charge more. 

2. Whose responsibility is it to pay the estoppel fees? Seller pays for these fees 

  • For non-delinquent accounts, the association may charge no more than $299. 
  • For delinquent accounts, the association may charge up to an additional fee of $179. 
  • If the estoppel certificate is requested on an expedited basis, the association may charge an additional fee of $119.

3. What are the obligations of condo Association when an estoppel is requested? The association is obligated by statute to provide an “estoppel certificate” within 10 working day of receipt of a written request. 

At closing assessments will be prorated per the estoppel and both the buyer and seller will contribute and pay (similar to taxes). 

If the title company does not verify the amount of assessments that may be due, the new owner becomes liable for all past due assessments and could then make a claim against the title insurance company for contribution.

So, when the association represents that a certain amount of money is due for a unit, the title company and the closing agent rely on that number in calculating the closing adjustments and issuing title insurance. In other words, when the association responds that a certain amount is due, it is “estopped” from later claiming some other amount is due, because the parties have relied upon the numbers provided. That is why it is important to be very careful in preparation of these documents, which under current law, also require the provision of additional information not related to assessments, such as if the if the property is in violation and the following items:

  • The monthly, annual or quarterly association dues; 
  • Any outstanding payments and fines;
  • The name of the management company or association that payments need to be made payable to;
  • Any parking space, storage unit, or dock space that comes with the unit;
  • Whether the subject condo unit or HOA property has any violations imposed against it;
  • The amount and frequency of any special assessments;

A Guide to Transferring Property to a Trust in Florida

By: Rima Suleiman, Esq.

Transferring property to a trust can be a strategic and beneficial estate planning move, providing a
seamless transition of assets and ensuring a smoother distribution of your estate. Understanding the
process of transferring property to a trust is crucial for effective estate management. This blog aims to
shed light on the key aspects of transferring property to a trust in Florida.

  1. Why Transfer Property to a Trust?:
    Before delving into the specifics of transferring property to a trust in Florida, it’s essential to grasp
    the advantages of utilizing this estate planning tool. A trust offers several benefits, including:
    • Probate Avoidance: Transferring property to a trust helps your heirs avoid the often time-
      consuming and costly probate process. This means that your assets can be distributed to
      beneficiaries without court intervention, providing a more efficient transfer of wealth.
    • Privacy Protection: Unlike a will, which becomes public record during probate, a trust allows for
      a private transfer of assets. This confidentiality can be crucial for individuals who value their
      privacy and wish to keep their financial matters confidential.
    • Incapacity Planning: Trusts can be designed to manage your assets in the event of your
      incapacity. By appointing a successor trustee, you ensure that your financial affairs are handled
      seamlessly without the need for court-appointed guardianship.
  2. How to Transfer Property to a Trust:
    The first thing a person will need to do to transfer property into a trust in Florida is to prepare and
    sign a new deed. The two most common kinds of deeds are warranty deeds and quitclaim deeds.
    Warranty Deeds vs. Quitclaim Deeds:
    Warranty deeds provide a warranty against liens on the property and third-party claims to the property, while quitclaim deeds offer a simple transfer of ownership interest without the same title insurance.
    Deed Preparation:
    When preparing a deed, accuracy is paramount. The property owner must use the exact name from the trust agreement and the original deed transferring the property to them. Furthermore, the property owner must include the property’s current owner(s) name(s), the new owner(s) name(s), and a proper legal description of the property. Trustee names should align with the trust document, and the date of trust document signing must be included. The legal description on the deed should match the original, and if co-owned, specify the transfer of a specific share.
    Notarization and Recording:
    After preparation, the deed must be signed and dated in front of a Florida notary and two witnesses.
    Subsequently, the deed should be recorded in the county office responsible for property records.

3. Unique Considerations and Challenges: Handling Multiple Properties through LLCs:
For those owning several commercial investment properties under individual LLCs, transferring 100%
ownership of each LLC to the trust simplifies the inheritance process for beneficiaries.
Documentary Stamp Tax:
When transferring real estate, a documentary stamp tax is applicable in Florida, excluding Miami-Dade
County. This fee, payable to the county clerk’s office, is $0.70 per $100 of property value.
Mortgage Considerations:
Property owners must be cautious when transferring properties with mortgages into trusts, as it may
trigger due-on-sale or due-on-transfer clauses. Lenders should be consulted beforehand, and
notification is necessary even if no accelerated repayment is required.
Title Insurance and Endorsements:
Checking with the title insurance company is crucial before transferring property into a trust. Depending
on the location and company, an endorsement on the title insurance policy or even the purchase of a
new policy may be required.
Insurance and Taxes:
Transferring property into a trust generally does not necessitate changes to property taxes or insurance.
However, communication with insurance carriers is vital to update ownership status in policies.
Step-Up on Basis and Property Taxes:
Retaining documentation of the ownership change is vital for tax purposes. With a revocable trust, the
benefit of a step-up in basis is preserved upon the property owner’s death. Property tax assessments
remain unchanged when transferring 100% ownership to one’s trust.

Mobile Home Park Rent Gouging – What Can Be Done?

By: Erin Glover-Frey, Senior Attorney

One of the issues our firm is seeing more and more of are dramatic increases in lot rent in mobile home communities. Most often, these communities are 55+ communities, meaning the vast majority of the residents are retirees, who thought they were moving to Florida to live the good life, but instead have been shouldered with ever-increasing expenses while still trying to live on a fixed income. 

This phenomenon is not limited to Florida and is happening nationwide. In September, a class-action lawsuit was filed in Illinois against the nation’s largest mobile home park management companies, alleging a conspiracy to inflate lot rental prices for older and low-income residents. How do management companies do this? Don’t these people have contracts that would prevent such drastic rent increases? Unfortunately, the answer is often no.

In Florida, mobile home parks are governed by a document called the “prospectus.” The prospectus sets out the terms of living in the mobile home community. Often the prospectus sets a “maximum” amount that rents can go up, such as tying rents to the Consumer Price Index (“CPI”). If the CPI goes up 5%, then rents go up 5%. Simple. But maybe not.

Florida law also provides a way for mobile home park owners to increase rents beyond that authorized in the prospectus. They simply have to give owners 90 days notice of the increase and provide evidence of comparable rents in other parks, presumably to show that the cost of living has increased in the community at large, and so should rents increase to keep up. Here is where the collusion with other park owners comes in. If all the companies agree to a set price they can artificially make it look like the rents are the “market” price for rent. The silver liming is that the rent increase process is technical, and park owners must follow it to the letter or else they may not succeed in raising rents.

Another way that park owners raise rents is when new tenants move into the park. Generally, all lot leases in the park start on the same day of the year – typically September 1. When a new tenant buys their mobile home and leases the lot, they take over the lease of the previous tenant for the remainder of the year. However, when September 1 comes around, this new tenant has to enter a new lease that the park owner will set at the “market rate,” which is generally set much higher than whatever rent the previous tenant was paying. Again, collusion comes into play to set the “market” price. The more new tenants who move into a park, the higher the average rent becomes, and the more park owners can justify raising rents for everyone to keep up with the market. It’s a vicious cycle.

The attorneys at Kistemaker Business Law Group are experienced with challenging mobile home park rent increases. While not every rent increase is unjustified, a skilled attorney may be able to assist you with challenging your rent increase.

Navigating Errors: The Importance of Corrective Deeds

By: Rima Suleiman, Esq.

A corrective deed, also known as a correction deed or deed of correction, is a legal document used to correct errors or omissions in a previously recorded real estate deed. Deeds are legal instruments used to transfer ownership of real property from one party to another. However, mistakes can occur during the drafting or recording of a deed, and a corrective deed is a way to address and rectify these errors.

Here are some common reasons for using a corrective deed:

Typographical Errors: Corrective deeds are often used to fix typographical errors in the names of the parties involved, the property description, or other relevant details.

Inaccurate Legal Descriptions: If there are errors in the legal description of the property, such as incorrect boundary details or missing information, a corrective deed can be used to provide accurate and corrected information.

Missed Signatures or Notary Acknowledgments: If a deed was not properly executed with required signatures or notary acknowledgments, a corrective deed may be used to remedy these deficiencies.

Incorrect Property Information: Errors in the property address, parcel number, or other details related to the property can be corrected through a corrective deed.

It’s important to note that a corrective deed doesn’t erase the original deed but rather serves to amend and clarify the inaccuracies in the recorded document. The corrected information is added to the public record through the recording of the corrective deed.

When preparing a corrective deed, it is advisable to consult with a real estate attorney or other legal professionals to ensure that the document meets the legal requirements and is properly executed.

Importance of a Company’s Name and Risks of Allowing Your Company to Be Administratively Dissolved

By: Rima Suleiman, Esq. 

In Florida, as in many other states, there are specific regulations and guidelines regarding the naming of corporations. When choosing a name for your corporation in Florida, you should consider the following factors:

Name Availability: Before registering a business name, you should check its availability to ensure that it is not already in use by another business. The Florida Division of Corporations provides an online search tool where you can check the availability of a business name.

Uniqueness: The name should be distinctive and not likely to cause confusion with existing businesses. It should also comply with any guidelines set by the Division of Corporations.

Legal Structure Designators: Florida may require the inclusion of certain legal structure designators in the business name, such as “Corporation,” “Incorporated,” “Corp.,” or “Inc.”

Restricted Words: Certain words may be restricted or prohibited. The Florida Division of Corporations has guidelines on the use of certain terms, and you should ensure that your chosen name complies with these rules.

Approval Process: After submitting the necessary documents for business registration, the Division of Corporations will review the application, including the proposed name. If the name meets all the requirements, it will be approved.

Trademark Considerations: While the Division of Corporations checks for name availability within the state, it’s essential to conduct a broader search for trademarks to ensure there are no conflicts at the national level.

To check the availability of a business name and find more information about naming requirements in Florida, you can visit the official website of the Florida Division of Corporations or contact them directly. Additionally, consulting with a legal professional or business advisor familiar with Florida business regulations can provide valuable assistance in ensuring compliance with all relevant naming requirements.

Importance of having a Well Written Residential Lease:

By Erum Kistemaker

It is important to note, that any lease for more than one year must be in writing to be binding. Therefore, it is important to have a written lease for a term of a year or more (long term lease). We suggest counsel is hired to prepare and review such a lease. It is critical that essential terms are included in the written lease to protect both the Landlord and Tenant. Some of those essential terms are as follows: term of lease; base rent and cam payment, late fees interest and default terms; terminating the lease with or without cause; dispute resolution; venue; and prevailing fee provisions.

Condo Election Recalls in Florida

By: Rima Suleiman, Esq.

Living in a condominium comes with many perks, but it also involves community governance. One crucial aspect of this governance is the ability to initiate a condo election recall, a powerful tool that allows residents to hold their elected leaders accountable. In this blog, we’ll explore the ins and outs of condo election recalls in Florida, empowering you with the knowledge you need to shape your community.

Understanding Condo Governance:

Before diving into condo election recalls, let’s briefly review the structure of condo governance in Florida:

Board of Directors: Condo associations are typically managed by a board of directors. These individuals make important decisions about the community’s finances, maintenance, and rules.

Elected Leaders: Board members are elected by the condo owners to serve a specified term.

Accountability: Elected leaders must act in the best interests of the community, and residents have the right to hold them accountable if they fail to do so.

The Condo Election Recall Process:

Florida condominium unit owners have options when it comes to the recall process. Section 718.112(2)(j) of the Florida Condominium Act states that any board member can be recalled and removed from office with or without cause by a vote or written agreement of a majority of all voting interests.

Recall By Vote

Careful attention must be given to all notice and quorum requirements for a recall. A special meeting of the unit owners to recall a member or members of the board may be called by 10% percent of the voting interests giving notice of the meeting as required for a meeting of unit owners (i.e. 14 days), and the notice shall state the specific purpose of the meeting. Email may not be used as a method of giving notice for a recall. If the recall is approved by a majority of all voting interests (51%) by a vote at a meeting, the recall will be effective. Thereafter, the board must notice and hold a board meeting within five (5) full business days after the adjournment of the unit owner meeting to recall one or more board members. The recalled board member shall be recalled effective immediately upon conclusion of the board meeting, provided that the recall is facially valid.

Recall By Written Agreement

If the proposed recall is by an agreement in writing by a majority of all voting interests (51%), the agreement in writing or a copy thereof must be served on the association by certified mail or by personal service by process server. The Division Condominium maintains a form recall by written agreement document that should be used. The board must then notice and hold a meeting of the board within five (5) full business days after service of the agreement in writing. Such member or members shall be recalled effective immediately upon the conclusion of the board meeting, provided that the recall is facially valid. The recalled board member shall be recalled effective immediately upon conclusion of the board meeting, provided that the recall is facially valid.

Essentially, facial validity means that the analysis of a voting ballot will be viewed by looking at the “four corners of the ballot.”  In Swint v. Flamingo South Beach I Condominium Association, Inc., Arb. Case No. 2021-03-1388, Summary Final Order (November 18, 2021), the chief arbitrator discussed Division precedent concerning the review of recall ballots and what makes a ballot facially invalid and stated the following:

Examples of facial invalidity include:

(1) the votes on the recall ballots were pre-marked;

(2) the recall ballot did not provide an opportunity for the voter to cast a vote individually to recall or retain, each board member targeted for recall;

(3) the ballot did not contain a signature; and 

(4) there are no markings on a ballot indicating that the unit owner voted to recall or retain a board member, i.e., where no check is in the box next to the board member’s name.

Challenge Petition

If the association certifies the recall of one or more board members, a board member who has been recalled has the right to an action challenging the recall certification by the association. A challenge to the recall must be filed within 60 days of the certification. However, the only issue determining whether a recall is valid is whether enough unit owners voted for recall. The required vote is a majority of all voting interests. There is usually one voting interest per unit.

Why Condo Election Recalls Matter:

Condo election recalls in Florida are crucial for several reasons:

Accountability: They hold board members accountable for their actions, ensuring that they act in the best interests of the condo community.

Resident Empowerment: They empower condo owners to actively participate in the governance of their community and influence its direction.

Maintaining Harmony: The threat of a recall encourages board members to be responsive to residents’ needs and concerns, promoting harmony within the community.

In conclusion, condo election recalls in Florida are an essential tool for condo owners who want to ensure their community is well-managed and that their elected leaders act in the best interests of the community association. By understanding the process and your rights, you can actively shape the future of your condo community and contribute to a harmonious living environment.

Florida Legislative Update: SUMMARY OF LAWS TAKING AFFECT OCTOBER 1, 2023 – HOAs, Condos and Cooperatives

The following new laws were adopted by the State of Florida impacting community associations:

House Bill 919

Meeting Notices – Board meeting notices must now include specific agenda items, except in the case of emergencies.

Construction Deposits – Deposits that are collected from a member for construction purposes must be kept separately and returned within 30 days after completion of the project, looking much more like the requirements for security deposits in the rental of real property.

Restrictions on gifts  – Broad protections have been added such as officers, directors and managers are prohibited from soliciting or accepting anything of value without providing consideration in return, except for minor food expenses or trade fair-related goods or services.

Crimes – The immediate removal from office is now mandated for officers or directors charged with specific crimes, including forgery, theft/embezzlement, destruction of records and obstruction of justice.

Conflict of Interest – Disclosure of conflicts of interest are required annually for developer-appointed board members and officers, as well as for all directors and officers before voting on matters that are influenced by the conflict.

HOA Fines – HOAs that exercise their long-standing right to impose reasonable fines for violations must hold mandatory hearings before the independent hearing committee before the fine may be made due and owing.

New Section, Section 720.3065, has been added to address fraudulent voting activities and associated penalties, classifying them as first-degree misdemeanors. These provisions aim to enhance transparency, accountability and fairness within homeowners’ associations in Florida.

House Bill 437 – HOA – Big Change

This bill introduces provisions that limit the ability of HOAs in Florida to restrict the installation, display or storage of certain items on parcels. Regardless of any association rules or covenants, associations cannot prohibit parcel owners or tenants from installing, displaying or storing items that are not visible from the frontage or adjacent parcels, such as artificial turf, boats, flags and recreational vehicles. This is likely to cause a lot of problems in HOAs, especially for communities that have homes that abut a body of water and are visible from the other side of the water. Finally, homeowners have the right to display up to two flags, including the United States flag, the official flag of Florida, military branch flags, the POW-MIA flag and first responder flags, in a respectful manner, including on freestanding flag poles. While the right to fly these flags is not new, its expansion to two flags and the expanded list of flags that may be flown are substantial changes that every HOA needs to be aware of.

Why and How to Avoid Probate

By: Erum Kistemaker

Why and How to avoid Probate?:

  1. Reason to Avoid Probate – Probate requires filing legal pleadings and court papers, appearance at court hearings, and representation by a licensed lawyer, probate in Florida is expensive and lengthy. Families typically must wait six months or more to complete the probate legal process and receive their inheritance.
  2. Estate planning techniques to avoid – File for a simplified probate (Summary Administration), creating living trusts, joint ownership or joint tenancy of real property, making gifts, using Florida “Lady Bird” deeds, transfer-on-death registration for securities, payable-on-death designations for bank accounts, and beneficiary designations for life insurance policies and retirement accounts. Each method has its own benefits and considerations, so it’s important to consult with an attorney to determine the best approach for your specific situation.