Articles Posted in New Legislation

GaryMars3-200x300Firm partner Gary M. Mars authored an article that appeared as a “My View” guest column in today’s “Business Monday” section of the Miami Herald.  The article, which is titled “Condo Fraud Legislation Adds Teeth to Florida’s Laws,” focuses on the ramifications of the newly minted Florida law that established criminal penalties for some of the most common maneuvers of association fraudsters.  Gary’s article reads:

The new legislation, which will add teeth to the Florida laws governing the administration of condominiums by establishing criminal penalties for fraudsters, has been signed into law by Gov. Rick Scott and took effect July 1.

The El Nuevo and Channel 23 reports revealed many cases of electoral fraud and forgery, conflicts of interest, mismanagement, and rigged bidding systems at a number of condo associations in South Florida. The Miami-Dade circuit court grand jury investigation focused on some of the cases from the news reports and several others, and its findings illustrated in detail that the state’s laws and enforcement measures are inadequate.

The grand jury report was severely critical of the Florida Department of Business and Professional Regulation (DBPR), which has jurisdiction over the administration and enforcement of a vast majority of the state’s condo laws. “Unfortunately, the DBPR seems ill-suited to resolve, correct or prevent many of the recurring problems that have been brought to their attention,” it concludes.

MHerald2015-300x72The report found that the DBPR’s “failure to demand that its investigators utilize, or comprehend basic investigative techniques is breathtaking.” Astoundingly, one of the agency’s investigators testified that he did not know basic information and needed to consult with his supervisor. Continue reading

Laura-Manning-Hudson-Gort-photo-200x300Firm partner Laura M. Manning-Hudson is quoted in an article that appears in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper, on Gov. Rick Scott’s veto of a bill that would have relaxed fire-protection requirements for older Florida condominium towers.  The article, which is titled “Scott Cites London High-Rise Fire in Vetoing Condominium Bill,” focuses on the Governor’s stance that the recent horrific tragedy of the deadly London apartment tower blaze has spotlighted the need for strong fire safety in residential buildings.  The article reads:

Pointing to a high-rise fire in London that killed dozens of residents, Gov. Rick Scott vetoed a bill that would have eased fire-protection requirements for older condominium buildings in Florida.

House Bill 653, which passed the Legislature with only one dissenting vote, dealt with requirements for retrofitting high-rise condominium buildings with fire sprinklers and other types of safety systems. The bill would have pushed back deadlines for the work and provided an avenue for condominium residents to vote to opt out of retrofitting.

Supporters pointed to potentially high costs for condominium residents, but the state fire marshal’s office and fire-protection groups asked Scott to veto the measure.

In doing so, he cited the June 14 fire at Grenfell Tower in London that killed dozens of people.

dbrlogo-300x57“Since my first day as governor, I have fought to make Florida the safest and most affordable place to live and raise a family,” Scott wrote in a veto message. “Decisions regarding safety issues are critically important, as they can be the difference between life and death. Fire sprinklers and enhanced life safety systems are particularly effective in improving the safety of occupants in high-rise buildings and ensure the greatest protection to the emergency responders who bravely conduct firefighting and rescue operations. While I am particularly sensitive to regulations that increase the cost of living, the recent London high-rise fire, which tragically took at least 79 lives, illustrates the importance of life safety protections.”

Laura M. Manning-Hudson, a partner in the West Palm Beach office of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, said it was “easy to understand” the governor’s reasoning in the wake of the fire.

“The governor made an important statement about the need to strike a better balance between cost-of-living and safety considerations with this veto,” she said. “The Legislature should revisit the matter during next year’s session.”

A House staff analysis said condo buildings that are three stories or more and have been constructed since 1994 are required to have sprinkler systems and, as a result, comply with the requirements. But the bill would have affected older high-rise buildings.

Our firm salutes Laura for sharing her insights into the veto of this legislation with the readers of the Daily Business ReviewClick here to read the complete article in the newspaper’s website (registration required).

House Bill 6027 was signed by Governor Rick Scott. The Bill makes changes to the financial reporting requirements of Florida condominiums, homeowners’ associations, and cooperatives, and will be effective as of July 1, 2017.  The Bill may be summarized as follows:

  • Sections 718.111(13)(b) and 719.104(c)2, Florida Statutes, are amended to remove the requirement that an association that operates fewer than 50 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures in lieu of financial statements, and instead bases financial reporting requirements strictly on annual revenues.
  • Sections 718.111(13)(d) and 719.104(b), Florida Statutes, are amended to remove the restriction which limit the ability of a condominium and cooperative association, respectively, to waive the financial reporting requirements of such Sections for more than three consecutive years.
  • Section 720.303(7), Florida Statutes is amended to remove the requirement that a homeowners’ association that operates fewer than 50 parcels, regardless of the association’s annual revenues, may prepare a report of cash receipts and expenditures in lieu of financial statements, and instead bases financial reporting requirements strictly on annual revenues.

House Bill 1237 was also signed by the Governor. The Bill modifies several sections of Chapter 718, Florida Statutes, such as creating anti-kickback provisions, criminalizing certain acts, requiring websites for associations of a certain number of units and further regulating potential conflicts of interest, among others and will be effective as of July 1, 2017.  The Bill may be summarized as follows:

CONDOMINIUM ASSOCIATIONS

Financial Reporting (Section 718.71, Florida Statutes)

  • A new law is created specifying that condominium associations shall provide an annual report to the Department of Business and Professional Regulation containing the names of all financial institutions with which they maintain accounts. Any association member may obtain a copy of the annual report from the department upon written request.

Anti-Kickback Provision (Section 718.111, Florida Statutes)

  • This new law provides that 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, from any person providing or proposing to provide goods or services to an association.
  • Any officer, director, or manager who knowingly solicits, offers to accept or accepts any thing or service of value or kickback is subject to civil and, if applicable, criminal penalties.

Criminalization of Certain Acts (Section 718.111, Florida Statutes)

The following acts are now punishable as criminal acts:

  • Forgery of a ballot envelope or voting certificate used in a condominium association election is punishable as a felony of the third degree in accordance with Section 831.01, Florida Statutes.
  • Theft or embezzlement of funds of a condominium association is punishable based upon the amount of the theft or embezzlement in accordance with Section 812.014, Florida Statutes.
  • Destruction of or refusal to allow inspection or copying of an official record of a condominium association that is accessible to unit owners within the time periods required by general law in furtherance of any crime is punishable as tampering with physical evidence in accordance with Section 918.13, Florida Statutes or as obstruction of justice as provided in Chapter 843, Florida Statutes.
  • An officer or director charged by information or indictment with a crime referenced above must be removed from office and the vacancy shall be filled, unless the bylaws provide otherwise, by electing a new board member, and the election must be by secret ballot. The vacancy created by the removal of such officer or director shall be filled until the end of the officer’s or director’s period of suspension or the end of his or her term of office, whichever occurs first.
  • If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or a director of any association and may not have access to the official records of any association, except pursuant to a court order.
  • If the charges are resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term of office, if any.

Hiring of Legal Counsel (Section 718.111, Florida Statutes)

  • An association may not hire an attorney who represents the management company of the association.

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Senate Bill 1520 was signed by Governor Rick Scott on June 16, 2017. The following is a summary of the bill, which will take effect on July 1, 2017:

SB 1520 amends 718.117, Florida Statutes, regarding the optional termination of condominiums, making it more difficult for a Plan of Termination to be passed without full consent of the unit owners.  The changes to the law reduce the amount of unit owners required to reject a plan, postpone the time until another plan can be voted on, and requires that the plan be approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (“Division”) based on factual and public policy reasons. Further, it guarantees that an optional termination will not result in a unit owner receiving less than his or her purchase price of the unit.

Changes to 718.117(1), (3) and addition of (21):

Applicability

  • The statute contains language indicating it is controlling over language in a condominium’s declaration and applies to all condominiums in the state in existence on or after July 1, 2007. The phrase: “Unless the declaration provides for a lower percentage” has been stricken indicating that the threshold established in the statute is the minimum vote required for optional termination.

Optional Termination

  • Prior to the effective date of the amendment, in order to approve a plan of termination, 80% of unit owners must approve the plan, and no more than 10% of unit owners can object. The changes to the statute now require an 80% unit owner vote approving a plan of termination; with less than 5% objecting. Additionally, the changes to the statute now provide that once the plan of termination passes a unit owner vote, it would then need to be approved by the Division.
  • The Division will have 45 days to review the Plan of Termination and notify the association of any deficiencies, or if it is rejected. If the Division does not respond within 45 days, the plan is deemed accepted.  Under the new law, plans of termination will now need to include factual circumstances that show that the plan complies with Section 718.117, Florida Statutes, and supports the public policies of the section, which are listed below.
  • If a plan of termination is rejected by 5% or more of the total voting interests of the condominium, then a new plan may not be considered for 24 months, as opposed to the current period of 18 months.
  • Under the current law, a condominium owner who purchased a unit from the developer must be made “whole” upon termination. In other words, the plan of termination could not provide for paying the unit owner less than the original purchase price. SB 1520 removes the language that restricts this requirement only to the original unit owner, meaning that an owner who purchased a resale condominium would also be entitled to receive a minimum of the purchase price upon optional termination. The bill applies this section to all unit owners, not just the ones who object to the plan.

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When a bill passes the Florida Legislature and is sent to the Governor for consideration, the Governor has 15 days from which to sign the bill into law, veto it, or do neither (in which case the bill will automatically become law if unsigned within such 15 days). Senate Bill 398 and House Bill 377 have been signed by Governor Rick Scott. The following are summaries of the bills, which will take effect on July 1, 2017:

Senate Bill 398 amends the provisions of Florida Statutes 718.116, 719.108, and 720.3085 to establish new requirements for condominium, co-operative, and homeowners’ associations regarding the issuance of estoppel certificates.

  • Reduces the time for associations to respond to written or electronic requests for estoppel certificates from fifteen (15) days to ten (10) business days.
  • Requires each association to provide on its website the identity of a person or entity (and their street or e-mail address) to which requests for estoppel certificates may be sent.
  • Provides that estoppel certificates must be submitted by hand delivery, regular mail, or e-mail to the requestor on date of issuance of estoppel certificate.
  • Changes authorized association signatories for estoppel certificates from officer or agent of association to any board member, authorized agent, or authorized representative of the association, including authorized employees of the association’s management company.
  • Establishes the information to be contained in, and the substantial form of, an estoppel certificate. The following information must now be included in the estoppel certificate: the date of issuance, name of unit owner pursuant to association records,  unit designation and address, parking space or garage number pursuant to association records, name and contact information for association counsel if the account is delinquent, fee for the preparation and delivery of the estoppel certificate, the name of the requestor, and assessment and other information, including whether the board of directors has the authority to approve of unit transfers and if there is a right of first refusal.
  • Establishes a 30-day effective period for estoppel certificates sent via e-mail or hand delivery, and a 35-day effective period if delivered by regular mail. Requires issuance of an amended certificate at no charge if the association learns of new information or a mistake made in the certificate prior to the sale or refinance of the unit.
  • Caps the fees which may be charged for preparation of an estoppel certificate at $250.00, unless such certificate is requested on an expedited basis, in which case an additional $100 may be charged; if there are delinquent amounts due to the association from the applicable parcel, the association may charge an additional fee not to exceed $150.00.
  • Provides that no fee may be charged if the estoppel isn’t provided within the 10 business-day deadline; and establishes an aggregate fee limit for requests for multiple units owned by the same owner if there are no past due monetary obligations owed by such owner.
  • Provides that the association waives the right to collect any amounts not included in the estoppel certificate from any person who relies on the information in good faith and his or her successors.
  • Requires that the board of directors pass a resolution to establish the authority to charge a fee for the preparation and delivery of estoppel certificates.
  • Provides that reimbursement for estoppel certificate fees for sales that did not occur may not be waived by agreement if the estoppel certificate fee was paid by someone other than the unit owner. Also provides for prevailing-party attorney fees related to actions for such reimbursements.
  • Provides that the statutory fees authorized shall be adjusted every 5 years in keeping with the Consumer Price Index, and the adjusted amounts shall be published on the DBPR’s web site.

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Each year, our elected state representatives and senators meet in Tallahassee for a legislative session where they review and debate an extensive amount of proposed bills, only to send a few of those bills to the governor to be signed into law.  For the third year in a row, our elected lawmakers will be discussing a bill that has once again resurfaced, and if passed, may have a significant impact on community associations’ wallets.

House Bill 483 — also known as Senate Bill 398 or “the home tax” bill — proposes to place a considerable amount of requirements relating to the issuance of estoppel certificates on the condominium, cooperative or homeowners association responsible for preparing them. If signed into law, community associations will need to be both financially and operationally prepared to abide by the stringent changes set forth in the bill.

An estoppel is a legally binding document prepared by a community association or its agent that discloses any liens, overdue assessments or any other money owed to the association, such as late fees and attorney’s fees.  Estoppels are required by title companies in standard real estate transactions in order to inform the seller and buyer of any outstanding financial obligation(s) on the unit or parcel.  If prepared incorrectly, the community association could be liable for miscalculated or incomplete balances, resulting in a loss for the association.

Contrary to some people’s beliefs, estoppels aren’t generated by the push of a button. They take time and precision to prepare, which is why a bill that shifts even more of the burden on the association could be detrimental.

Florida-legislature2-300x169One of the main components of this proposed bill is to mandate more rigorous deadlines for the preparation of estoppels.  Currently, associations have 15 days to prepare and deliver an estoppel once it is requested.  The bill would shorten this period to 10 business-days, which could be difficult for associations of varying sizes and levels of sophistication, as some will be anchored by antiquated bookkeeping or a lack of resources.

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With the approval of Amendment 2 last November to legalize the use of medical marijuana in Florida, the state legislature and Department of Health are now developing the rules and regulations that will govern the use of cannabis by those who suffer from a number of ailments listed in the new constitutional amendment.  Likewise, now is also the time for associations to begin discussing and considering the implementation of their own rules and restrictions regarding the use of the drug by unit owners in their communities.

For most communities, the question of whether the use of medical marijuana should be allowed in the common areas will likely cause the most unease.  Other concerns include the use of cannabis inside of the residences, especially in condominiums where the odor could permeate into the common elements or other residences, and some properties may wish to ban the drug from the community in its entirety.

It remains unclear whether the state’s lawmakers will attempt to ban the smoking of medical marijuana.  If smoking marijuana is allowed under the laws that will be adopted in order to comply with the amendment, community associations will need to address whether they must make exceptions to their rules in order to allow residents with a doctor’s prescription to smoke medical marijuana.

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One of the more notable developments resulting from the 2015 Florida legislative session included a change to community association statutes establishing the opportunity for associations to offer their members the ability to vote electronically.  While many community association stakeholders have had an immediate reaction to jump on the  e-voting bandwagon, we have counseled — and will continue to counsel — our clients to proceed with caution, as with all new innovations presented during the digital age.

We have come to find that electronic voting may benefit some community associations, while it may not address the voting concerns of others.  In light of this, we will continue to encourage community association board members, managers and owners to seek competent legal advice regarding whether electronic voting is a good option for their association.  If the decision is reached to implement e-voting as an option, community association board members and managers should work with their lawyers to evaluate which online voting provider’s system is best suited to meet the needs of their association, while making sure the software complies with the Florida community association online voting requirements.

Additionally, it is advisable that associations use an electronic voting system provider that is independent from its law firm and management company, so as to ensure that the integrity of the association’s voting process is best protected.

VTRIn our efforts to vet online voting systems, we realized that most lacked the basis for proper application in basic community association settings or lacked the flexibility to adapt to unique voting situations.

After multiple months of research, we were successful in identifying a provider well suited for community association use.  VTR, an e-voting software system owned and operated by FOB Software, is one provider we feel community association directors and managers should consider.

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Community association attorneys are often asked about the lack of uniformity in the Florida laws and regulations for condominium associations and those for homeowners associations. There are many differences between the statutes governing condominium associations and those for HOAs, and condominiums are much more heavily regulated.

In fact, all condominium associations in the state must pay an annual fee to fund the Florida Department of Business and Professional Regulation’s Division of Condominiums, which serves to provide regulatory oversight over condominium association elections and disputes stemming from the actions of their members and boards of directors.

Homeowners associations have been excluded from the purview of this state agency since its inception, which, among other things, has created significant discrepancies in the laws governing these different types of community associations involving their elections, meetings, board recalls, vendor contracts, and other areas. However, a bill that was introduced by Rep. John Cortes of Osceola County seeks to change that and bring HOAs under the regulatory oversight of the state agency.

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HB 653 represents potentially sweeping changes for HOAs in Florida. It seeks to rename the state agency in order to add homeowners associations to its name; authorize the agency to investigate certain complaints involving HOAs, conduct related investigations and adopt penalty guidelines; have HOAs pay an annual fee to fund the agency, provide notices for certain meetings, impose certain fines, and revise annual meeting requirements; and it provides for changes to the provisions relating to the transition of association control, and the requirements for voting by general and limited proxy and for board elections and vacancies.

The bill calls for the state agency to oversee the mediation of HOA disputes and maintain a list of certified mediators who the associations must use for these proceedings. HOA elections, which have historically been left to the protocols and procedures established under their respective declarations, would be required to adhere to the process that has been in place for condominium associations.

The changes involving elections are very significant, as are the measures pertaining to meeting notice procedures. If the bill is passed and these new provisions go into effect on July 1, 2016, HOAs across the state will need to be prepared to make dramatic changes to many of their policies and procedures. This will undoubtedly present some serious difficulties and challenges for many associations that have grown accustomed to their previous protocols over the years and decades, but the introduction of this bill appears to send the message that the time for uniformity in the state’s laws governing condominium and homeowners associations may now be upon us.

The firm’s Michael L. Hyman authored an article that appeared as a “My View” guest column in today’s Business Monday section of the Miami Herald.  Michael’s article shed light on the new estoppel bill that is being considered by the Florida Legislature and how it would lead to increased fees for most associations.  His article reads:

“. . . with the backing of the powerful real estate industry and title companies, a new version of the bill now seeks to take the burden of paying for the preparation of estoppels away from some of their clients and place it on the existing homeowners in the communities where their clients wish to buy.

House Bill 203, this year’s version of the measure, has already passed the House’s Civil Justice Committee, and it is on track for a vote during the 2016 legislative session that began on Jan. 12. It calls for changes to allow estoppel certificates to be delivered electronically and require them to include specific content as well as effective periods. The amount that associations can charge home buyers for the certificates would be capped at $500, and the certificates would be required to be prepared and delivered within 10 business days of a request.

None of these changes are the one that presents the most concerns for associations, although the requirement for a 10 business-day turnaround will prove difficult in complex cases that may include fines in addition to delinquent maintenance dues and/or litigation. Bear in mind that the size and sophistication of community associations varies greatly, and small associations with antiquated bookkeeping will find these difficult cases to be particularly daunting. In addition, any differences between the capped amounts that home buyers can be charged for the preparation of an estoppel and the actual cost of creating it would be passed on to all of the unit owners of an association.”

Michael’s article concludes:

“. . . the most troubling aspect of the bill for associations is that they and their unit owners would be on hook for these fees in many cases when sales fail to close. The bill calls for associations to wait for a sale of a unit to close until they get paid for the work and fees that they incurred in preparing an estoppel to facilitate the sale. If the home or condominium sale did not close, the association would ultimately be responsible for these fees and costs if it were unable to collect them from the seller of the unit, as would often be the case with so many distressed properties being sold by owners already delinquent on their association dues.

This aspect of the bill is sure to have a deleterious financial impact on many condominium associations and HOAs throughout the state. Real estate sales fail to close all of the time due to failed inspections, and the associated costs for conducting these home inspections are always rightfully borne by the prospective buyers. Estoppel certificate fees, which are typically less than $400, are actually among the smallest expenses of all of the closing costs and fees incurred in connection with real estate transactions.

Community associations in Florida have had to overcome dire financial strains in order to recover from the collapse of the housing market and the foreclosure crisis. HB 203 seeks to shift estoppel fees to the associations and their unit owners, and take them away from those who enter into contracts for the purchase of a property and then fail to close. Association directors and members as well as property managers should contact the Florida lawmakers for their district to voice their opposition.”

Our firm congratulates Michael for sharing his insights with the readers of the Miami Herald on the potential negative impact of this legislation on community associations in Florida.  Click here to read the complete article in the newspaper’s website.

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