June 2006

Vol. XVI No. 6

On May 5, 2006 the legislature adjourned. In the rush to the exit a number of association related bills were enacted. To become a law, a bill must be signed by the Governor. As of press time, it appears doubtful that the Governor will veto any of the bills; however, that is always a possibility.

For homeowners’ associations, proposed changes to §720.3035 in House Bill 391 will require review of architectural guidelines and restrictions. This Bill includes significant changes to homeowners’ association financial record keeping and pre-suit mediation procedures. With a July 1, 2006 deadline looming, condominium associations must quickly adopt plans for emergencies. By December 31, 2006, condominium associations must also file plans to retrofit buildings with generators if a building exceeds seventy-five feet in height. Termination of condominiums was extensively revised by Senate Bill 1556.

A number of bills that were generally perceived as undermining the ability of associations to operate were not adopted. For example Senate Bill 586 introduced by Senator Siplin would have prohibited condominium associations to collect delinquent assessments through foreclosures unless the assessments exceeded $2,500.00. House Bill 1227 introduced by Representative Garcia also with its companion Senate Bill 2570 from Senator Diaz de la Portilla would have restricted association governance authority.

Because each legislative act is significant, this article will not seek to second guess each reader’s determination of what is most important. The Bills are summarized in bill number order. Stay tuned to next month’s memorandum to clients to see which Bills have been signed into law by the governor.

House Bill 65 "Foreclosure Proceedings."

This Bill seeks to regulate the distribution of foreclosure sale proceeds. It targets "equity stealing," a situation where investors that are seen as less than scrupulous pray upon owners who lose their property to foreclosure and subsequently lose their equity. Significant changes to foreclosure judgments and filings during foreclosures are added. The law is scheduled to take effect July 1, 2006.

House Bill 391 "Community Associations."

This Bill revises many technical details concerning associations. It is scheduled to take effect July 1, 2006. The bill’s provisions are summarized as to whether the condominium, homeowners’ or cooperative association acts are intended to be effected.

Homeowners' Associations.

Revitalization. §712.11 is created to extend Chapter 720 Part IV covenant revitalization procedures to non-Chapter 720 associations.

Governance. §720.302 is amended to clarify that homeowners’ associations are also governed by either the Florida for-profit or not-for-profit corporations acts.

Board Meetings. §720.303(2)(a) is amended to clarify that rules concerning notice of board of directors meetings also apply to committee and similar bodies when they meet to make a final decision concerning spending association funds or those committees or bodies which may approve or disapprove architectural decisions concerning parcels/lots.

Records. §720.303(5) is amended to clarify that the association is not required to provide information to individuals who are not owners; however, if the association desires to do so then the association may charge a reasonable fee, subject to a maximum of $150.00, for that effort.

Budgets. §720.303(6) is amended to provide that budgets must include annual operating expenses for all association expenses. The budget must also include reserve accounts or if waived provide a conspicuous warning that reserves have not been kept. If reserves are kept, then the funds must be utilized for the purpose collected unless approved by a majority of all voting interests.

Financial Reporting. §720.303(7) is amended to provide more time for fiscal year financial reports and requiring compliance with Board of Accountancy regulations.

Architectural Control. §720.3035 is created purporting to limit homeowners’ associations architectural control to those matters that are specifically stated or reasonably inferred in the declaration of covenants. If the declaration provides that authority and the authority is not specific, then the association must publish guidelines as authorized by the declaration of covenants. Setbacks are defined as well remedies for associations failing to comply with the law.

Fees. §720.305(1) is amended to clarify that a member who prevails in a lawsuit against the association pursuant to the Homeowners’ Association Act may not only recover their attorneys’ fees, but also a sum to reimburse the member for the attorneys’ fees expended by the association on that litigation.

Merger. §720.306(1)(c) is amended to clarify that the merger of homeowners’ associations is not a material or adverse alteration of proportional voting interests thus making it easier to merge homeowner associations.

Transition. §720.307(3) is amended to add a new provision to clarify the financial records that must be provided by a developer to the association at turnover which includes source documents of the association from the date of incorporation. A final audit is required if the association has performed an audit for each year since incorporation. This section applies to associations created after the end of this year.

Assessments. §720.308(2) is created permitting developers to guarantee the payment of assessments for a limited period of time before transition.

Mediation. §720.311 is significantly amended to remove the Division of Land Sales from most mandatory pre-suit mediation efforts. Most covenant enforcement disputes still must proceed to mediation before a suit is filed. Instead of seeking mediation through the State of Florida the "aggrieved party," usually the association, provides a notice to member/owner of a dispute and provides a list of alternative mediators and a process."

MRTA. §712.11 is created to confirm that an association not subject to Chapter 720 may nevertheless use §720.304.

Condominium Associations.

Beaches. §718.106(5) is created to prevent local governments from prohibiting unit owners or associations from allowing guests, licensees or invitees access to public beaches neighboring the condominium.

Mortgagee Consent. §718.110(11) is amended to provide that after October 1, 2006, neither a new declaration of condominium, articles of incorporation nor by-laws can require joinder of mortgage holders to amendments and then providing a process to facilitate identification of mortgage holders.

Exceptions are amendments that would adversely effect priority or would materially affect a mortgagee.

Confirms standing to challenge on basis of mortgagee consent only to affected mortgagees.

Limits actions challenging lack of mortgagee consent to five years after recording.

Sprinklers. §718.111(2)(l) provides that retro fitting of sprinkler systems in high raise buildings may be extended from the year 2012 to the year 2025.

Clubs. §718.114 is amended to limit associations from acquiring club memberships by construing an acquisition twelve months after recording declaration as a material alteration or substantial addition to association property.

Mixed Use Condominium. §718.404 is amended to clarify that commercial unit owners cannot exercise a veto by virtue of their status as commercial owners over residential owners voting. This is stated as being retroactive.

Cooperatives. §719.103(18) is created defining "equity facility clubs" allowing memberships for recreational facility access but not a right to use an accommodation, together with amendments to §719.507 prohibiting local laws, ordinance and codes from interfering with those clubs.

§95.113(c) is amended to limit the latent defect claim period from 15 to 10 years.

Shall apply to all causes commenced on and after July 1, 2006.

If new limitations would bar claim, then claim must be filed by July 1, 2007.

§718.618 was created to limit converter accounts and warranties to improvements constructed before designated as a condominium.

House Bill 1139 "Construction Defects." Chapter 558 is amended to clarify terms and to extend provisions to all construction except public transportation projects.

Senate Bill 1556 "Condominium Termination." A "Plan of Termination" of a declaration of condominium may be approved by the lesser of a majority of voting interests or as provided in the declaration of condominium.

Economic Waste of Impossibility.

When the total estimated cost of repairs necessary to restore the improvements to their former condition or bring them into compliance with applicable laws or regulation exceeds the combined fair market value of all units in the condominium after completion of the repairs; or

When it becomes impossible to operate or reconstruct a condominium in its prior physical configuration because of land-use laws or regulations.

Notwithstanding paragraph (a), a condominium in which 75 percent or more of the units are timeshare units may be terminated only pursuant to a plan of termination approved by 80 percent of the total voting interests of the association and the holders of 80 percent of the original principal amount of outstanding recorded mortgage liens of timeshare estates in the condominium, unless the declaration provides for a lower voting percentage.

b. Optional Plan. Unless the declaration of condominium provided for a lower percentage, a plan of termination may be approved with the consent of 80 percent of the voting interests.

c. Judicial Review. If 80 percent of the total voting interests fail to approve the plan of termination but fewer than 20 percent of the total voting interests vote to disapprove of the plan, the circuit court shall have jurisdiction to entertain a petition by the association or by one or more unit owners and approve the plan of termination, and the action may be a class action. A court is to ensure an equitable distribution of proceeds. Three presumptions may be used: (1)value determined by owners; (2) most recent sale as shown by property appraiser records; (3) units interests in common elements.

d. Mortgagees. If consent is required but withheld, then the lien shall transfer to the proceeds.

i. If mortgage holder is satisfied through plan, then mortgagees consent not required for the plan of termination. Not applicable to a condominium with 75 percent of units as timeshares.

ii. May seek a termination trustee.

e. Receivership. After a natural disaster an interested person may petition for a determination of identity of directors, or for a receiver if in best interests of the unit owners.

f. Considerations. Optional plan provisions include:

i. Member’s Right of continued possession of unit.

ii. Conditional plan of termination.

g. Challenge. 90 day period to challenge plan of termination.

 

House Bill 7079 "Roads." §316.006(2)(b)4 and (3)(b)5 is created to permit homeowners’ associations to authorize law enforcement on private roads.

House Bill 7121 "Emergency Management." §553.509(2) is created to require condominiums 75 feet or higher with a public elevator to have at least one public elevator pre-wired and capable of operating on an alternative emergency energy source for a specified number of hours for five days which also operates fire alarm system and emergency lighting. Buildings must be pre-wired and a generator available.

Plans must be filed by December 31, 2006.

Installation must be completed by December 31, 2007.

As of July 1, 2006, must have an emergency operations plan, including a life safety plan for evacuation, maintenance and health, safety and welfare of residents.

Records for generator and maintenance must be kept .

Effective upon becoming law.

Look forward to our July Memorandum to Clients to determine the status of these laws.

Michael J. Gelfand has been re-appointed to chair The Florida Bar’s Condominium and Planned Development Committee. He also has been requested to provide lecture updates at The Florida Bar’s Summer Meeting and at the Chautauqua Institute.