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BackerReport is a periodical addressing topics of interest to community associations in South Florida and is provided as a service to the clients and friends of Backer Law Firm, P.A. All articles are written by attorneys of Backer Law Firm, P.A. (unless otherwise indicated) and are protected by copyright. It is important to note that court decisions discussed in this newsletter are sometimes subject to change as the parties pursue further appeals or other remedies. The articles that discuss court cases in this newsletter are based upon the courts' decisions that are released when the newsletter was written.
During this past legislative session, the
Florida Legislature passed a number of
significant changes to both the laws
governing condominium associations and those
governing homeowners associations. A number
of law firms and others who follow changes in
real estate law jumped the gun and wrote
articles and newsletters about the
legislative changes and distributed
descriptions of the changes to
their clients and others before the bills
actually became law. Even though most had
indicated that the law had not yet been
approved by the governor , many readers had
presumed that
the governor would either approve the
legislation or simply allow the legislation
to become law without his approval. In what
came as a surprise to many, the governor
vetoed a bill that contained a number of
significant changes that would have applied
to community associations. For example, one
of the bills which was vetoed by the governor
included changes that affected the way that
homeowners associations elected their boards
of directors and also contained language that
authorized an association to record a claim
of lien for unpaid fines. Those proposed
changes and many others were vetoed by the
governor and will not take effect. To the
extent that readers of BackerReport
may have
read about those expected changes in other
publications, please be aware that those
changes did not take affect. The changes
that have been reported in BackerReport
previously and the ones that are reported
here are those which were approved by the
governor and took effect on July 1, 2008.
Since I know that many readers of
BackerReport also read other law firms'
publications, I am sure that there may be
some confusion about which laws took affect.
Generally speaking, we have attempted to
cover all of the amendments that have
significant impact on condominiums and
homeowners associations here. If you did not
read about a particular change in
BackerReport, it is likely safe to presume
that other amendments you may have heard
about were among those which were vetoed by
the governor. If you have any doubt, contact
your community association attorney for
further clarification.
The last issue of BackerReport described
amendments to the Condominium Act. In a
separate bill recently approved by the
governor, additional changes were made to the
Condominium Act. In one instance, the
legislature changed one particular provision
of the Condominium Act twice; so, if your are
having déjà vu after reading the changes
described in this issue, do not be surprised.
In this issue we will describe the changes
to the laws officially affecting condominium
associations and those affecting condominium
that we did not address in our last issue.
CONDOMINIUM CHANGES
DIRECTOR VOTING Previously, a condominium director who attended a meeting of the board was presumed to have assented to an action taken by the board unless that director voted against the action or abstained because of an asserted conflict of interest. The statute has been amended to provide that a director who abstains from voting on an action taken shall be presumed to have taken no position with regard to the action. This amendment takes precedence over a previous amendment passed during the same legislative session. INSURANCE One of the most significant changes in the Condominium Act was the wholesale change to the language contained in section 718.111 concerning insurance. The Act was changed so significantly that it cannot be adequately described in the context of this newsletter. An attempt will be made to summarize its content; however, it is important to consult with your association's attorney with particular questions about insurance and how it applies to your condominium. The provisions of section 718.111(11) apply to every residential condominium in Florida regardless of the date of the condominiums declaration. "ADEQUATE HAZARD INSURANCE" "Adequate hazard insurance" is required to based upon the replacement cost of the property to be insured as determined by an independent insurance appraisal or update of a prior appraisal. The full insurable value is required to be determined at least once every thirty-six (36) months. The Act provides that an association or group of associations may provide adequate hazard insurance through a self insurance fund provided that it complies with the requirements of Chapter 624, Florida Statutes. The statute also provides that an association may also provide adequate hazard insurance coverage for a group of no fewer than three (3) communities created pursuant to Chapter 719, 720 or 721 by obtaining and maintaining insurance coverage sufficient to cover an amount equal to the probable maximum loss for the communities for a 250 year windstorm event. DEDUCTIBLES The association insurance policies may include deductibles as determined by the board. The deductibles are required to be consistent with industry standards and prevailing practice for communities of similar size, age and construction in the locale where the condominium property is located. The deductibles may be based upon available funds, including reserve accounts, or predetermined assessment authority at the time that the insurance is obtained. The amendments require that the board establish the amount of deductibles based upon the level of available funds and predetermined assessment authority at a meeting of the board. The meeting is required to be open to all unit owners as described in section 718.112(2)(e). The notice of the meeting is required to state the proposed deductible and the available funds and the assessment authority relied upon by the board and must estimate any potential assessment amount against each unit, if any. The meeting is authorized to be held in conjunction with a meeting to consider a proposed budget or amended budget. Every hazard policy issued or renewed after January 1, 2009, is required to provide primary coverage for all portions of the condominium property as originally installed or replacement of like kind and quality in accordance with the original plans and specifications. In addition, the policy is required to cover all operations or additions made to the condominium property or association property pursuant to section 718.113(2). The coverage is required to exclude the all personal property within the unit or limited common elements and floor, wall and ceiling coverings, electrical fixtures, appliances, water heaters, water filters built-in cabinets and countertops and window treatments including curtains, drapes, blinds, hardware and similar window treatment components. Every hazard policy issued on or renewed on or after January 1, 2009 to an individual unit owner must contain a provision stating that the coverage afforded by that policy is excess coverage over the amount recoverable under any policy covering the same property. Those policies are required to include special assessment coverage of no less than $2000.00 per occurrence. Improvements for additions to the condominium that benefit fewer than all unit owners are required to be insured by the unit owner or owners having use of those improvements or additions. The association may insure those improvements and additions, but the cost if required to be borne by the owners that have use of that property. This part of the amendment is surely going to be a source of controversy since what "extras" one unit owner bought from developer may become blurred as the years pass. UNIT OWNERS' INSURANCE The association is required to insist that each unit owner provide the association with evidence of a currently effective policy of hazard and liability insurance upon request, but not more than once per year. If an owner fails to provide a certificate of insurance within thirty days after the association provides a written request, the association is authorized to purchase a policy of insurance on behalf of the owner. The cost of that policy, together with reconstruction costs which are the responsibility of the unit owner may be collected in the manner provided for the collection of assessments described elsewhere in the Condominium Act. RECONSTRUCTION WORK Reconstruction work on a condominium performed after a casualty loss is required to be undertaken by the association except as otherwise provided in the Act. A unit owner is authorized to undertake reconstruction work on portions of the unit with the prior written consent of the board. The board is authorized to condition the approval for such work based upon repair methods, qualifications of the proposed contractor or the contract that is used for that purpose. Unit owners are required to obtain all required governmental permits and approvals before commencing reconstruction. Unit owners are responsible for the cost of reconstruction of any portion of the condominium property for which the unit owner is required to carry casualty insurance. Any reconstruction work undertaken by the Association is chargeable to the unit owner and enforceable as an assessment. FIDELITY BONDING The association is required to maintain insurance or fidelity bonding of all persons who control or disburse funds of the association. The insurance policy or fidelity bond is required to cover the maximum funds that will be in the custody of the association or its managing agent at any one time. As used in the Act, "persons who control or disburse fund of the association" include, but are not limited to, those individuals authorized to sign checks on behalf of the association, the president, secretary, and treasurer of the association. AUTHORIZED AMENDMENTS The Act provides that the association may amend the declaration of condominium to conform the declaration to the insurance coverage requirements of the Act without regard to any requirement for approval by mortgagees of amendments that affect insurance requirements. PAYMENT OF DEDUCTIBLES In an effort to clarify previous provisions of the Condominium Act and to, effectively, conform the Act to a number of decisions made by the Division, the Act now provides that any portion of the condominium property required to be insured by the association against casualty loss which is damaged by casualties shall be reconstructed, repaired or replaced by the Association as a common expense. All hazard insurance, deductibles, uninsured losses and other damages in excess of hazard insurance coverage under the hazard insurance policies maintained by the association are deemed to be common expenses of the association. There are exceptions to that general rule. For example, a unit owner is responsible for the cost of repair or replacement of any portion of the condominium property not paid by insurance proceeds if the damage is caused by intentional conduct, negligence or failure to comply with the terms of the declaration or rules of the association. To the extent that an owner is responsible for paying for the repair of damage to his unit caused by intentional conduct, as described in the previous sentence, the Act now provides that the unit owner's financial responsibility extends also to the repair and replacement of other portions of other condominium property or the personal property of other unit owners. Another exception is provided where an association is not obligated to pay for repair or reconstruction or repairs of casualty losses were known or should have been known to a unit owner and were not reported to the association until after the insurance claim of the association was settled or resolved with finality or denied on the basis that it was untimely filed. The Act provides that an association, with the approval of a majority of the voting interests of the association, may opt out of the provisions of portions of the insurance allocation requirements and may allocate the repair or reconstructions expenses in the manner in which was provided in the declaration as originally recorded or amended. That vote is authorized to be approved by the voting interests of the association without regard to any mortgagee consent requirements. If an association votes to opt out of the guidelines for repair and reconstruction expenses as described in the Act, it must record a notice setting forth the date of the opt-out vote and the page of the official records book on which the declaration is recorded. The decision to opt-out is effective upon the date of the recording of the notice in the public records by the association. REPAIR OF UNIT-OWNER-INSTALLED IMPROVEMENTS The association is not obligated to pay for any reconstruction or repair expenses due to casualty loss to any improvements installed by either the current or former owner of the unit or by the developer if the improvement benefits only the unit for which it was installed and is not part of the standard improvements installed by the developer installed in all units as part of original construction whether the improvement is located within the unit or not. ASSESSMENT CERTIFICATES Section 718.116 has long provided that owners may obtain a certificate from the association signed by an officer or agent of the association stating all assessments and other monies owed to the association with respect to the condominium parcel. That section has been amended to authorize a designee of the unit owner to request that information. Also, the fee that an association may charge for the preparation of that certificate must be included on the certificate. The authority to charge a fee for the certificate is required to be established by a written resolution adopted by the board or provided by a written management, bookkeeping or maintenance contract. If the certificate is requested in conjunction with the sale or mortgage of a unit, but the closing does not occur, upon proper and timely request for a refund, the fee is required to be refunded. Interestingly, the statute provides that the refund is the obligation of the unit owner and the association may collect it from the unit owner in the same manner as an assessment provided elsewhere in the Act. DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES The Division's name change is reflected in amendments to the Act and the words "Land Sales" have been dropped from the name. Amendments to the Act have expanded the Division's authority. The Division is authorized to issue an emergency cease and desist order reciting with particularity the facts underlying their findings. The emergency cease and desists order is effective for ninety (90) days. The statute also provides that the Division may petition a court for the appointment of a receiver or conservator. The appointed receiver or conservator is authorized to take action to implement the court order to insure the performance of the order and to remedy any breach.
HOMEOWNERS ASSOCIATION CHANGES In a section similar to the foregoing provision applicable to condominiums, Section 720.30851 was created to govern homeowners associations that must provide estoppel certificates stating all assessments and monies owed the association by a parcel owner or mortgagee with respect to the parcel. The association is required to provide such a certificate within fifteen (15) days after the receipt of the request and is authorized to charge a fee for the preparation of the certificate. The amount of the fee must be stated on the certificate. The authority of the homeowners association to charge a fee for the certificate is required to be established by a written resolution adopted by the board or provided by a written management, bookkeeping or maintenance contract. If the certificate is requested in conjunction with the sale or mortgage of a parcel and the closing does not occur, after timely request and evidence that the sale did not occur, the fee is required to be refunded. The refund is the obligation of the parcel owner and the association may collect the fee from the owner in the same manner as other assessments as elsewhere provided in the Act. If your community decides to charge such a fee, consult your association attorney to assist in preparing an appropriate resolution. FLAGS Previously, Section 720.304(2) provided that homeowners may display a United States flag or an official flag of the State of Florida. The Act had previously authorized the flying of certain other flags representing the various military services of the United States on specific holidays. The amendment to the statute deletes the limitation on specific holidays and adds POW-MIA flags to the list of authorized flags. In addition, the Act has been amended to allow a homeowner to erect a free standing flag pole no more than twenty feet (20') high on any portion of the homeowner's property regardless of any covenants, restrictions, bylaws, rules or requirements of the Association if the flag pole does not obstruct sight lines at intersections and is not erected within or upon an easement. The homeowner is authorized to display from the flag pole one United States flag not larger than four and one half feet by six feet and may additionally display one flag of the State of Florida or the United States Army, Navy, Air Force, Marines or Coast Guard or a POW-MIA flag. The additional flag must be of equal size to or smaller than the United States flag. ASSESSMENTS Section 720.3085(1) was added to specifically authorize an association to lien a parcel to secure the payment of assessments and other amounts provided for in that section when authorized by the governing documents. The Act now provides that the association's lien is effective from and relates back to the date on which the original declaration of the community was recorded. As to first mortgages of record, the lien is effective from and after recording of a claim of lien in the Public Records in the county where the parcel is located. The statute specifically provides that the amendment to the law does not bestow upon any mortgage, lien or judgment a priority that it did not already have prior to July 1, 2008. The homeowner's association statute now provides that an owner may record a notice of contest of lien to accelerate the period of time within which an association must seek enforcement of the lien. The statute provides the format for the notice of contest of the lien and provides that it is to be recorded in the official records. After the notice of contest has been recorded, the clerk of court is required to mail a copy to the association by certified mail. After the service of the notice of contest, the association has ninety (90) days within which to file an action to enforce the lien. If the action to enforce the lien is not filed within that ninety (90) days period the lien is deemed void. The Act now provided that the association may bring an action to foreclose the claim of lien without waiving its right to recover a money judgment for the unpaid assessments. The association is now statutorily entitled to recover its reasonable attorney's fees incurred in an action to foreclose its claim of lien or to recover a money judgment for the unpaid assessments. If a parcel owner remains in possession of a parcel after a foreclosure judgment has been entered, the court is authorized to require that parcel owner to pay a reasonable rent for the parcel. If the parcel is rented or leased during the pendency of a foreclosure action, the association is entitled to the appointment of a receiver to collect the rent. The expenses of the receiver are to be paid by the non-prevailing party in the foreclosure action. The Act now specifically provides that the association may purchase the parcel at the foreclosure sale and may hold, lease, mortgage or convey the parcel. MORTGAGEE LIABILITY FOR ASSESSMENTS Previously, in 2007, the legislature amended the homeowner's association statute to specifically provide that a parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. That language allowed many homeowners associations to collect delinquent assessments from lenders that took title to parcels through foreclosures. Before July 1, 2008, there was no statutory limitation of liability for a lender that took title to a property in a homeowners association for assessments that came due prior to taking title. Now, effective July 1, 2008, the liability of a first mortgagee or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or deed in lieu of foreclosure for unpaid assessments is limited to one percent (1%) of the original mortgage debt or unpaid assessments that came due during the twelve months immediately prior to the acquisition of title, whichever is less. QUALIFYING OFFER Last year, the legislature created a procedure that was intended to allow parcel owners who were the subject of association foreclosure actions a means of obtaining time within which to pay the amounts owed. The process that was provided in last year's legislation had many deficiencies and, basically provided the property owner with an opportunity to simply further delay the proceedings without any ultimate agreement or obligation to pay. The legislature amended the qualifying offer procedures effective July 1, 2008 to better protect the association. Under the new qualifying offer provisions of section 720.3085(6), a parcel owner in a homeowners association who is sued by the association has an opportunity to provide a written qualifying offer to the association using the form that is described in the statute. If the owner uses the form properly and serves the offer upon the association, the owner will have an opportunity to stay the foreclosure proceedings for up to sixty (60) days to pay all of the amounts indicated in the qualifying offer plus any amounts accruing during the pendency of the offer. There remain a number of deficiencies; however, the new procedures better protect the association and require that the property owner commit to paying all of the amounts secured by the association's lien in order to obtain the stay of the proceedings. Also under the new procedures, the association is entitled to proceed to obtain a foreclosure judgment against the parcel and the parcel owner for the amount in the qualifying offer and any amounts that accrue after the date of the offer. APPOINTMENT OF RECEIVERS A new section 720.3053 was adopted to apply to homeowners associations that fail to fill vacancies on the board of directors sufficient to constitute a quorum as required by its bylaws. The new procedure entitles any member of the association to give notice of the member's intent to apply to the circuit court to appoint a receiver to manage the affairs of the association when the association fails to fill vacancies on the board sufficient to constitute at quorum. The statute provides a specific notice that is required to be sent to all of the homeowners by certified mail and posted in a conspicuous place within the homeowners association at least thirty (30) days before filing a petition seeking the appointment of receivership. The statute provides that the association has the opportunity to fill the vacancies within thirty (30) days after the notice in order to avoid the filing of a petition for the appointment of a receiver.
You may obtain back issues of BackerReport online by going to our website www.BackerLawFirm.com. Click the image above. |
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