BackerReport )
A newsletter addressing issues of concern to South Florida Community Associations June 2010
Articles In This Issue
  • 2010 Changes to the Condominium Act and the Homeowners Association Act
  • Back Issues of BackerReport Available Online
  • 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.


    2010 Changes to the Condominium Act and the Homeowners Association Act

    The Florida Legislature made a number of changes to both the Condominium Act and the Homeowners Association Act which were recently approved by Governor Crist. Many of the changes to these statutes did little to change the substance and meaning of the statutes. For example, the legislature replaced the word "shall" with the word "must" in a number of instances and replaced the word "which" with the word "that" in another slew of changes. Other than these relatively minor and, arguably, meaningless changes, the legislature approved a number of more substantive changes. I have highlighted the various more important changes and separated them with headings below:

    Elevator Safety Act

    The Elevator Safety Act was amended to provided that updates to the code requiring modifications for Phase II Firefighters' Service on existing elevators as amended into the Safety Code for Existing Elevators and Escalators may not be enforced on elevators in condominiums, cooperatives or multifamily residential buildings that were issued a certificate of occupancy by local building authorities as of July 1, 2008 for five (5) years or until the elevator is replaced or requires major modification, whichever occurs first. The exception provided in that Amendment does not apply to a building for which a certificate of occupancy was issues after July 1, 2008.

    Clarifications to Chapter 617 (Not for Profit Corporate Act)

    The legislature approved a number of amendments to Chapter 617 to clarify that certain sections of that statute which apply to most corporations not for profit do not apply to condominiums, homeowners associations or cooperatives. For example, the sections of 617 that apply to the removal of directors were specifically excluded for application to condominiums, cooperatives and homeowners associations. Also, Section 617.1606 now provides that the section 617.1601 through 617.1605 concerning access to records does not apply to corporations that are a condominium association, homeowners associations or cooperative.

    Condominium Insurance Policies

    An Amendment to Section 627.714 was approved that specifically requires that insurance policies issued to condominium unit owners include at least a $2000.00 property loss assessment benefit.

    Fire Prevention Code

    Section 633.0215 of the Florida Fire Prevention Code was amended to provide that a condominium, cooperative or multifamily residential building that is less than 4 stories in height and that has a corridor providing an exterior means of egress is exempt from the requirement to install a manual fire alarm system under Section 9.6 of the Life Safety Code. The Condominium Act was amended to provide that a condominium association is not obligated to retrofit the common elements, association property or units in a residential condominium with a fire sprinkler system if the building has been certified for occupancy by the applicable governmental agency and if the unit owners have voted to forego retrofitting by the affirmative vote of a majority of voting interests in the condominium. For those where the owners have not voted to for go the retrofitting, the statute now provides that the local authorities having jurisdiction may not require completion of the retrofitting with a fire sprinkler system before the end of 2019. The statute has been amended to provide that by December 31, 2016, an association that is not in compliance with the requirements for a fire sprinkler system and has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required installation with the local government having jurisdiction demonstrating that the association will be compliant by December 31, 2019. The statute has also been amended to provide that, if there has been a previous vote to forego retrofitting, a vote to require retrofitting may be obtained at a special meeting of the unit owners called by a petition of at least ten percent (10%).

    Definition of "Developer"

    A number of controversies have arisen where unit owners, including lenders, have acquired a number of units in a condominium and have been construed to be "developers", as defined by the Condominium Act. An amendment to Section 718.103 (16) specifically excludes a bulk assignee or a bulk buyer of units as defined in Section 718.703 from being construed as a developer

    Condominium Insurance

    Amendments were made to the portion of the Condominium Act concerning a condominium association's obligation to purchase insurance. The word "hazard" was deleted from the statute and replaced with the word "property" with regard to the type of insurance that an association must obtain. The Act still requires that such insurance be purchased by the association for the full insurable value, replacement cost or similar coverage based upon the replacement cost of the property as determined by an insurance appraisal or an update of a prior appraisal. The Act now clarifies that the replacement cost must be determined at least once every thirty-six (36) months.

    The statute prior to the recent amendment already required that the Board of Directors establish the amount of the deductible at a meeting of the board. The former statute required that the notice of the meeting had to state the proposed deductible, the association's available funds and the assessment relied upon the Board. The entire notice requirement was deleted from the statute. The statute was also amended to delete the specific list of requirements for condominium association insurance policies and was replaced with a simple reference to Section 627.714, Fla. Stat. A condominium unit owner's insurance policy must comply with the requirements of that section. The statute also now deleted the requirement that an association obtain evidence of each unit owner's purchase of the required insurance. While the statute still requires that owners obtain insurance, it is no longer necessary that the condominium association obtain proof that the owners have complied with their legal obligations.

    Condominium Official Records

    Prior to the amendment, the Condominium Act required that an association maintain as a part of its official records a current roster of all unit owners and their mailing addresses, unit identification, voting certifications and, if known, telephone numbers. The Statute also required that an association maintain electronic mailing addresses and the numbers designated by unit owners for receiving notice sent by electronic transmission of those unit owners consenting to receive electronic transmission of such notices. The amendment to the statute requires that, if a unit owner revokes his prior consent to receipt of notice by electronic transmission, his electronic mailing address and telephone number must be removed from the association's records. Interestingly, the amendment to the statute requires that the telephone number be deleted along with the email address if the owner revokes his consent to receive notice by electronic transmission. There is no explanation in the statute as to why the telephone number would need to also be deleted simply because the owner revokes consent to receive electronic notice.

    The Condominium Act requires that various pieces of information be kept among the association's Official Records. There are various provisions in the statue that exclude specific types of information from the records that an association must make available to unit owners. For example, certain attorney-client privileged materials are not a part of the Official Records. Information obtained by an association in connection with the approval of a lease, sale or other transfer of a unit are not a part of the association's Official Records which are subject to inspection. Medical records of unit owners and unit owners' social security numbers, drivers' license numbers and credit card numbers were among the association's records which were not available for inspection by other unit owners or their agents. Amendments to the statute now also exclude personnel records of employees, including but not limited to disciplinary, payroll, health and insurance records, from those records which are subject to inspection by unit owners. Also, the statute now excludes unit owners' email addresses, telephone numbers, emergency contact information, addresses of the unit owners other than as provided to fulfill the associations' notice requirements and other personal identifying information of any person, excluding the person's name, unit designation, mailing address and property address from those records which are among the association's Official Records available for inspection by other unit owners. The statute was also amended to provide that the associations is not responsible for the use or misuse of the information provided to an association member or his or her authorized representative pursuant to the compliance requirements of the statute unless the association has an affirmative duty not to disclose such information pursuant to other sections of the statute. The fact that the amendment to the statute only relieves an association from potential liability from misuse of information when the information is required to be disclosed illustrates how important it is that an association keep those records which are not subject to inspection segregated from other records so that they are not mistakenly distributed to unit owners.

    Condominium Reserves

    The Condominium Act requires that all associations prepare and complete or contract for the preparation and completion of a financial report for the preceding year within ninety (90) days after the end of the association's fiscal year. The statute also has language which requires the Division to adopt rules setting forth uniform accounting principles and standards to be used by associations for their financial reporting requirements. The statute has been amended to also require that the Division rules include standards for presenting a summary of association reserves, including a good faith estimate disclosing the annual amount of reserve funds that would be necessary for the association to fully fund reserves for each reserve item based on the straight-line accounting method. The disclosure is not applicable to reserves funded using the pooling method. Under the old statute, associations that operated fewer than fifty (50) units were only required to prepare a report of cash receipts and expenditures in lieu of a financial statement irrespective of how much revenue that association has annually. The statute has been amended to expand that exception to condominiums with fewer than seventy-five (75) units.

    Condominium Directors' Terms

    The legislature attempted to clarify language contained in the last version of the Condominium Act which limits directors' terms to one year. The amendment to the statute still limits the terms of directors to one year unless the bylaws permit staggered terms of not less than two years and there is an approval by a majority of the total of voting interests. The new language provides that, if the number of board members whose terms have expired exceeds the number of eligible members "showing interest in or demonstrating an intention to run for the vacant positions" each such board member whose term has expired is eligible for reappointment. Since it is not possible for someone to run for a seat on the board without providing a written notice of intention to run, I am not certain what the legislature means by "showing interest in" running for a vacant position. The statute does not indicate how an association is able to determine whether someone has shown an interest in running for the board where they have not provided a written notice of intention to run. In any event, the amended language does very little except to confirm that the one year term limit was not intended to prevent directors whose terms have expired from staying on the board where there are not adequate candidates for the board. The Act was also amended to clarify that co-owners of a unit may not serve as members of the board at the same time unless they own more than one unit or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy. Current law provides that a person who has been suspended or removed by the Division from the board of directors or who is delinquent in the payment of any fee or assessment (more than ninety (90) days delinquent) may not serve. The statute has been amended to extend the disqualification of a potential candidate if the candidate is delinquent in the payment of fines or regular or special assessments for more than ninety (90) days.

    The Condominium Act has been amended to provide that a director or officer of the association who is more than ninety (90) days delinquent in the payment of any monetary obligation due the association shall be deemed to have abandoned the office, creating a vacancy in the office to be filled according to the law. Previously, the suspension only applied to those directors or officers who failed to pay regular assessments to the association. It is important to note that this section of the Act does not provide that the abandonment of office created by the delinquency may be cured to allow the directors back on the board like the statute does for those who have failed to comply with the certification requirement. It may be reasonably concluded that the legislature did not intend for a director to be able to pay the amounts owed the association in order to reinstate his position on the board.

    Condo Candidates' Certification

    Under the old law, candidates for the board of directors were required to sign a certification form attesting to the fact that he or she had read and understood the governing documents of the association and the provisions of the Condominium Act. That requirement has been repealed by the recent amendment to the Act. While the certification is not necessary to be filled out by the candidates, a new section has been added to the Act which requires that newly elected or appointed directors certify in writing to the secretary of the association that he or she has read the association's declaration of condominium, articles of incorporation, bylaws and the current written policies within ninety (90) days of being elected to the board. The new director must certify that he or she will work to uphold the documents and policies to the best of his or her ability and that he or she will faithfully discharge his or her fiduciary responsibility to the association's members. In lieu of providing the written certification, the newly elected or appointed director may submit a certificate of satisfactory completion of the educational curriculum administered by a Division-approved condominium education provider. If a director fails to file the written certification or educational certificate, he or she is suspended from the board until he or she has complied with that requirement. The person appointed to fill that vacancy fills the seat only for the period of suspension.

    Communication Services

    Under old law, if provided in the Declaration, the cost of a master antenna television system, cable television service may be construed as a common expense of a condominium. The statute has now been amended to provide that the cost of communications services as defined in Chapter 202, including information services or Internet services may also be provided by a bulk contract and billed as a common expense.

    Assessment Collections

    One of the more frustrating aspects of operating a condominium association arises when a unit owner who is delinquent in the payment of monies owed the association rents his unit and refuses to pay the association. A new amendment to the Condominium Act provides that, if the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due the association, the association may make a written demand that the tenant paid the future monetary obligations related to the unit to the association and the tenant is required to make the payment. The statute provides that the demand is continuing in nature and the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. In addition to the requirement that the tenant pay the association, the amendment to the statute authorizes the association to issue notices under the Landlord-Tenant Act if the association was a landlord without imposing other landlord-type duties upon the association.

    Suspension of Use Rights

    The Condominium Act was amended to provide that, if a unit owner is delinquent for more than ninety (90) days in paying a monetary obligation due to the association, the association may suspend the right of the unit owner or the unit's occupant, licensee or invitee to use the common elements, common facilities or any other association property until the monetary obligation is paid. The amendment does not apply to limited common elements intended to be use only by that unit and does not apply to common elements that must be use to access the unit including parking spaces or elevators. The fourteen (14) days advance notice and opportunity for a hearing which would be required for a fine or a suspension for some purpose other than the nonpayment of assessments does not apply when the suspension is being imposed for the failure of an owner to pay assessments. In addition to suspending the rights of an owner or occupant of a unit for failure to pay assessments, an amendment to the Act also provides that the association may suspend the voting rights of a member when the member has failed to pay any monetary obligation due the association which is more than ninety (90) days delinquent.

    Bulk Assignees

    The legislature has acknowledged a number of problems with the existing language in the Condominium Act and Administrative Code which have created legal issues for lenders that have acquired multiple units in condominium communities. Because of the definition of "developer" some lenders who have acquired title to many units in a particular condominium have been construed as a successor developer which imposes a number of legal obligations upon the property owner. The legislature adopted what is known as the "Distressed Condominium Relief Act" and it is found in Section 718.701 and the sections that follow. The amended language is too extensive for succinct discussion here, but, suffice it to say that the intent of the legislature is to relieve certain entities who will be construed as bulk assignees from the obligations of the developer as described in the condominium documents and the Condominium Act. These bulk assignees will be liable for all of the duties and responsibilities of the developer under the declaration and the Condominium Act except those obligations which are specifically described in the new statute. Among the items that the bulk assignees are not responsible for include warranties for work done prior to the acquisition by the assignee, liabilities of the developer board taken prior to the bulk assignment and liabilities arising out of the former developer's failure to fund assessments or to resolve budgetary deficits. Whether a party has acquired sufficient units to be construed as a bulk assignee under the statute needs to be evaluated on a case by case basis with the assistance of your association's legal counsel.

    Homeowners Association Changes

    HOA Board Meetings

    Section 720.303 was amended to clarify that meetings between the Board or a committee and the association's attorney to discuss proposed or pending litigation or meetings of the board held for purpose of discussing personnel matters are not required to be open to the members other than directors. Previously, the statute could reasonably be interpreted to require that the meetings concerning personnel matters may only be held without being open to other members where the association's attorney was present. With the amendment, it is clear that the attorney need not be present to have meetings concerning personnel matters without having it open to other lot owners.

    Document Inspection

    The homeowners' association statute was amended to require a lot owner to submit a request to inspect the association records by certified mail, return receipt requested in order to create the rebuttable presumption that an association has failed to comply with the requirement to make documents available to lot owners. Previously, only written request was required in order to create that rebuttable presumption. Apparently, there was some concern that lot owners were falsifying their written requests. With the requirement that the request be provided by certified mail, there will be less controversy about whether an actual written document inspection request was submitted.

    If a lot owner desires copies of records that are produced by the association and the association has a copier, it may charge up to fifty cents ($0.50) per page. If the association does not have a photo copy machine available where the records are kept or if the records requested to be copied exceed 25 pages, the association may have copies made by an outside vendor or the association's management company personnel and the association may charge the actual cost of copying, including any reasonable costs involving personnel fees and charges at an hourly rate for the vendor or employee time to cover administrative costs to the association or vendor.

    The statute was also modified to clarify those records which are not available to lot owners. Associations' employee records included but not limited to disciplinary, payroll, health and insurance records, are not available for lot owner inspection. Social Security numbers, driver license numbers, electronic mailing addresses, telephone numbers, emergency contact information and addresses for parcel owners other than as provided for association notice requirements and other personal identifying information of any person are not included among the records that must be provided to lot owners.

    Reserves

    If a homeowners association's budget provides for accounts for deferred maintenance, including, but not limited to funds for capital expenditures and deferred maintenance, but those accounts are not created or established pursuant to paragraph (d) of the statute, a specific disclaimer must be included for the preceding fiscal year that discloses that those reserves were not funded.

    Directors' Compensation

    A new section was added that prohibits the compensation of directors, officers or committee members of a homeowners association. The statute specifically prohibits directors, officers or committee members from benefiting in any way financially from services rendered the association. There are a number of exceptions which include, for example, a fee or compensation which is authorized by the governing documents and any fee or compensation which is authorized in advance by a vote of the majority of the voting interests voting in person or by proxy at a meeting of the members.

    Suspension of Use Rights

    Section 720.305 was amended to provide that, if a member is delinquent for more than ninety (90) days in paying a monetary obligation due the association, the association may suspend the rights of the member or the member's tenants, guests or invitees or both from using the common areas and facilities until the monetary obligation is paid. The provisions regarding the suspension of use rights do not apply to portions of the common areas that must be used to provide access to the parcel or utility services provided to the parcel. Interestingly, even though this section of the Homeowners Association Statute mirrors in some respects a similar provision in the Condominium Act, the amendment authorizing the suspension of use rights in the Homeowners Association Statute does not state that the suspension may be done without providing fourteen (14) days notice of an opportunity of a hearing before a committee. It appears that, in the homeowners associations' context, the suspension of use rights for failing to pay still requires a fourteen (14) day notice and an opportunity for hearing.

    Homeowners Association Elections

    The Homeowners Association Act was amended to provide for election procedures that had previously been absent from the statute. Now, the statute provides that, if the governing documents permit voting by secret ballot by members who are not in attendance at a meeting of the members for the election of directors, those ballots must be placed in an inner envelope which much be delivered to the association in an outer envelope that identifies the name of the member, the lot for which the vote is being cast and the signature of the lot or parcel owner casting the ballot. The Act was also amended to authorize the nomination of a lot owner to serve on the Board prior to the election if the election process allows voting by absentee ballot. The amendment to the statute is silent about how or when a person must nominate himself prior to the election.

    Filling of Vacancies on the Board

    A new section in 720 now provides that, unless otherwise provided in the bylaws, any vacancy occurring on the Board before the expiration of a term may be filled by an affirmative vote of the majority of the remaining directors even if the remaining directors constitute less than a quorum. Alternatively, the statute authorizes the Board to hold an election to fill the vacancy in which case the election procedures must conform to the requirements of the governing documents. The amended statute provides that, unless otherwise provided in the bylaws, a board member appointed or elected to fill a vacancy is appointed for the unexpired term of the seat being filled.

    Collection of Rent from Tenants

    A new subsection has been added to Section 720.3085 which authorizes an association to collect rent from the tenant who occupies a unit when the property owner has failed to pay assessments. The statute authorizes the association to demand that the tenant pay all future monetary obligations relating to the parcel to the association. Certain specific notice requirements must be made in order for the association to take advantage of this new section.

    Limitation on Developer Special Assessments

    A new section 720.315 was added to Chapter 720 to prohibit a board of directors that is being controlled by the developer from levying special assessments unless a majority of the parcel owners other than the developer have approved the special assessment by a majority vote at a meeting called of the membership where a quorum is present.

    Back Issues of BackerReport Available Online
    Narrow BLF Skyline

    You may obtain back issues of BackerReport online by going to our website www.BackerLawFirm.com. Click the image above.


    phone: 561 361 8535
    Email Marketing by