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:
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.
Purchase of Foreclosed Unit (Section 718.111, Florida Statutes)
- Except for a timeshare condominium, a board member, manager or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure.
Official Records and Association Website (Section 718.111, Florida Statutes)
- The list of official records an association is required to maintain is now expanded to specifically include bids it receives for materials, equipment, or services.
- A renter of a unit may now inspect and copy an association’s bylaws and rules. Previously, such documents were only made available to association members and their authorized representatives for inspection and copying.
- Condominium associations with 150 units or more, which do not manage time share units, are now required to post digital copies of certain records on the association’s website before July 1, 2018. The following records, in digital format, must be posted on the association’s website:
- The recorded declaration and bylaws, the Association’s articles of incorporation, and any amendments of the foregoing.
- Rules of the association.
- Management agreements, leases, contracts (including summaries of bids for materials, equipment, or services, which must be maintained on the website for one year).
- Annual budget and any proposed budget to be considered at the annual meeting.
- Financial report and any proposed financial report to be considered at a meeting.
- Director certifications.
- Contracts or documents regarding conflicts of interest or possible conflicts of interest between an association and its directors (or other entities in which an association’s director is an officer or director or financially interested).
- Unit owner meeting notices and agenda (notices must be posted in plain view on the front page of the website, or on a separate subpage labeled “notices which is conspicuously visible and linked from the front page).
- Documents to be considered and voted on during owners’ meetings and documents listed on the agenda (must be posted at least seven (7) days before the meeting at which the document or information within the document will be considered).
- Board meeting notices, agenda and materials.
- The association’s website must be either an independent website wholly-owned and operated by the association, or a website or web portal operated by a third-party provider. The association’s website must be accessible through the internet and must contain a sub-page, web portal, or protected electronic location that may be accessible only to the unit owners and employees of the association not the general public. Upon a unit owner’s written request, the association must provide the unit owner with a username and password and access to the protected sections of the association’s website.
- An association shall ensure that the information and records listed above, which are not permitted to be accessible to unit owners, are not posted on the association’s website. If protected information or information restricted from being accessible to unit owners is included in documents that are required to be posted on the association’s website, the association shall ensure that the information is redacted before posting online.
- To implement the website requirement above, the Department of Business and Professional Regulation shall include within the next condominium annual fee statement a notice informing condominium associations or 150 or more units of the requirement to create a website for association documents on or before July 1, 2018.
Financial Reporting (Section 718.111, Florida Statutes)
- An association must mail or hand deliver the most-recent financial report to a requesting owner within five (5) business days after the association receives a written request from the owner. A unit owner may provide written notice to the Division of the association’s failure to mail or hand deliver the most-recent financial report after submitting a proper written request to the association. If the Division determines that the association failed to comply with a proper written request by a unit owner, the Division shall provide written notice to the association that it must mail or hand deliver a copy of the most-recent financial report to the unit owner and the Division within five (5) days of receiving such notice. If the association fails to comply with the Division’s request, the association may not take advantage of the option to waive the financial reporting requirement in the future. A financial report received by the Division in accordance with this section shall be maintained by the Division and the Division shall provide a copy of the report to an association member upon their request.
- The provision permitting associations with fewer than fifty (50) units to prepare a report of cash receipts and expenditures in lieu of financial statements has been removed. Associations with total annual revenues of less than $150,000.00 are still required to prepare a report of cash receipts and expenditures.
Debit Cards (Section 718.111, Florida Statutes)
- A new provision has been added specifying that an association, its officers, directors, employees and agents may not use a debit card issued in the name of the association or billed directly to the association for the payment of any association expense. Use of a debit card issued in the name of an association or billed directly to the association for any expense that is not a lawful obligation of the association may be prosecuted as credit card fraud in accordance with Section 817.61, Florida Statutes.
Director Term Limits (Section 718.112, Florida Statutes)
- Board members may serve two-year terms if permitted by the bylaws or articles of incorporation. A board member may not serve more than four consecutive two-year terms, unless approved by the vote of 2/3 of the total voting interests of the association or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.
Recall of Director (Section 718.112, Florida Statutes)
- A board shall duly 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 of the board members or after receipt of the agreement in writing for recall. The requirements for the board to certify the recall at the board meeting, or to file a petition for arbitration within five (5) business days therefrom in the event it does not certify the recall, have been removed from the statute.
- Such member or members recalled shall turn over to the board within ten (10) full business days any and all records and property of the association in their possession. Previously, the recalled director(s) had to do so in five (5) business days.
- Removes the requirement that the board which does not certify the recall must file a petition for arbitration with the Division.
Conflict of Interest (Section 718.112, Florida Statutes)
- An association may not employ or contract with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of relation by blood or marriage of a board member or officer. The foregoing does not apply to a service provider in which a board member or officer, or a relative owns less than one (1) percent of the equity shares.
Arbitration (Section 718.1255, Florida Statutes)
- The Division may, but is no longer required, to employ full-time attorneys to conduct arbitration hearings.
- The Division may certify attorneys who are not employees of the Division to conduct arbitration hearings. A person may only be certified by the Division to act as an arbitrator if they have been a member in good standing of the Florida Bar for at least five (5) years and have mediated or arbitrated at least ten (10) disputes involving condominiums in Florida during the three (3) years immediately preceding the date of application, mediated or arbitrated at least thirty (30) disputes in any subject area in Florida during the three (3) years immediately preceding the date of application, or attained board certification from the Florida Bar in real estate law or condominium and planned development law.
- An arbitrator’s certification is valid for only one (1) year and an arbitrator who does not maintain the minimum qualifications for initial certification may not have their certification renewed. The department may not enter into a legal services contract for an arbitration hearing with an attorney who is not a certified arbitrator unless a certified arbitrator is not available within fifty (50) miles of the dispute.
- Upon determination by the Division that a dispute exists and that a petition substantially meets the requirements of the statute and any other applicable rules, the Division is required to assign or enter into a contract with an arbitrator and serve a copy of the petition on all respondents. The arbitrator is now required to conduct a hearing within thirty (30) days after being assigned, or entering into a contract with the Division, unless the petition is withdrawn or a continuance is granted for good cause shown.
- The arbitration decision is now required to be rendered within thirty (30) days after the hearing and presented to the parties in writing. An arbitrator’s failure to render a written decision within thirty days after the hearing may result in the cancellation of the arbitrator’s certification.
Agreement for Operation, Maintenance or Management of Condominiums (Section 718.3025, Florida Statutes) – Entirely New Subsection of Section 718.3025, Florida Statutes
- A maintenance or management service company managing a residential condominium after turnover, or an officer or board member of such party, may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of association lien for unpaid assessments or take a deed in lieu of foreclosure. The foregoing does not apply to timeshare condominium associations.
- If 50% or more of the units in the condominium are owned by a party contracting to provide maintenance or management services to an association managing a residential condominium after turnover, or by an officer of board member of such party, the contract with the party providing maintenance or management services may be cancelled by a majority vote of the unit owners other than the contracting party or an officer of board member of such party. The foregoing does not apply to timeshare condominium associations.
Conflicts of Interest (Section 718.3027, Florida Statutes) – Entirely New Section of Chapter 718, Florida Statutes
Directors and officers of a board of an association that is not a timeshare condominium association, and the relatives of such directors and officers, must disclose to the board any activity that may reasonably be construed to be a conflict of interest. A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice:
- A director or an officer, or a relative of a director or an officer, enters into a contract for goods or services with the association.
- A director or an officer, or a relative of a director or an officer, holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.
- If a director or an officer, or a relative of a director or an officer proposes to engage in an activity that is a conflict of interest, as described above, the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the meeting agenda. If the board votes against the proposed activity, the director or officer, or the relative of the director or officer, must notify the board in writing of his or her intention not to pursue the proposed activity or to withdraw from office. If the board finds that an officer or director has violated the foregoing provision, the officer or director shall be deemed removed from office. The vacancy shall be filled according to general law.
- A director or an officer, or a relative of a director or an officer, who is a party to, or has an interest in, an activity that is a possible conflict of interest, as described above, may attend the meeting at which the activity is considered by the board and is authorized to make a presentation to the board regarding the activity. After the presentation, the director or officer, or the relative of the director or officer, must leave the meeting during the discussion of, and the vote on, the activity. A director or an officer who is a party to, or has an interest in, the activity must recuse himself or herself from the vote.
- A contract entered into between a director or an officer, or a relative of a director or an officer, and the association, which is not a timeshare condominium association, that has not been properly disclosed as a conflict of interest or potential conflict of interest is voidable and terminates upon the filing of a written notice terminating the contract with the board of directors which contains the consent of at least 20% percent of the voting interests of the association.
Obligations of Owners and Occupants (Section 718.303, Florida Statutes)
- The Bill clarifies that an association may suspend a unit owner’s or member’s voting rights in connection with the nonpayment of a monetary obligation owed to the association and now imposes a monetary limitation that the amount owed must exceeds $1,000.00 and be more than ninety (90) days delinquent.
- Proof of the monetary obligation must now be provided to the unit owner or member thirty (30) days before the suspension of voting rights can take effect.
- A receiver may not exercise the voting rights of any unit owner whose unit is placed in receivership for the benefit of the association.
Ombudsman (Section 718.5012, Florida Statutes)
- An ombudsman now has the specific power to review secret ballots cast at a vote of the association.