Community Associations - 2016 Legislative Update

On Thursday, June 23 I was privileged to be part of Carr, Rigg's & Ingram's 2016 Community Association Managers (CAM) CPE Seminar in Miramar Beach, where I was invited to speak on legislative updates for 2016 pertaining to community associations. For those who were unable to attend, here's all the information provided at the seminar. 

HB791 – The 2015 Association Bill

  - Insurance Clarification – Condos: Stat. § 718.111(11)

• Provides that condominium property that is damaged by an insurable event must be repaired or replaced by the association as a common expense. If the damage is not the result of an insurable event, the association or the unit owners are responsible for the repair or replacement, as determined by the declaration or bylaws.
• The bill specifies that in cases where the damage is not the result of an insurable event, themaintenance provisions of the declaration or bylaws determine whether the association or the unit owners are responsible for the repair or replacement.

 - Assessment Payment: Stat. § 718.116(3) & (5), 719.108(3)

• The previous payment structure (payment received and applied in order to interest, admin late fee, attorney’s costs/fees, then to delinquent assessment) applies in spite of any restrictive endorsement, designation, or instruction placed on or accompanying a payment.
• The bill amends this to provide that the required distribution of delinquent assessment payments also applies in spite of any purported accord and satisfaction.
• This is in response to Croix Lane Trust v. St. Croix at Pelican Marsh Condo. Ass'n, Inc., 144 So. 3d 639 (Fla. 2d DCA 2014), owner sent payment to association marking “payment in full.” Court said that by the Association accepting and depositing this resulted in an accord and satisfaction. 

• Fining Procedure
• Starting to unify fining procedure for HOA, COAs, and Co-ops.
• A fine may be levied by the board on the basis of each day of a continuing violation, with a single notice and opportunity for hearing before a committee.
• The committee’s role is basically an appellate role. It is limited to determine whether to confirm or reject the fine or suspension levied by the BOD.
• Condos (& Co-ops generally)
• “The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board. If the committee does not agree, the fine or suspension may not be imposed.”
• HOAs
• “If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed. The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board.” 

• Amounts of the fines: Stat. § 718.303(3), 719.303(3), 720.305(2)
• Condos & Co-ops
• Do not allow for fines greater than $100 day or $1000 in aggregate, regardless of what docs say.
• HOAs
• Fines may not exceed $100 per violation unless provided in the governing docs. Used to say “up to $100 per violation” and did not have provision for governing documents allowing for higher daily fine.
• Note – this doesn’t change the $1000 aggregate fine unless otherwise stated in governing documents. 

• Suspension of Voting Rights and Use Rights: Stat. § 718.305(5) & (7), 720.305(5) & (6), 720.305(2)(A) 

• Suspensions apply to the owner more so than the unit. In other words, suspensions imposed apply even if the suspension arose from less than all the units or parcels owned by the member.
• Applies to Condos
• Provides that if delinquent when nominations for HOA director are due, that person cannot run for the board. Provides that if director is 90 days delinquent then their seat is deemed abandoned.
• Only applies to HOAs. Can’t hold seat when delinquent for Condos, but can run for director while delinquent.
• Owners with suspended voting rights do not count toward quorum or any voting percentages. Suspension may not prohibit ability to enter or leave property, as well as may not prohibit the right to park on property.

• Electronic Notice: Stat. § 719.112(2), 719.10691)(d)3., 720.303(c)
• Strikes the requirement in that electronic notice can only be provided if allowed in the by-laws. Now owners can opt-in to electronic notice of meeting regardless of by-laws.
• Applies to Condos, Co-ops, and HOAs. 

• Electronic Voting: Stat. § 718.128, 719.129, 720.317
• Allows for internet-based online voting according to certain terms:
• Authenticate the member's identity to the online voting system.
• Transmit an electronic ballot for board elections to the electronic voting system that ensures the secrecy and integrity of each ballot.
• Verify the authenticity of receipts sent from the electronic voting system
• Confirm, at least 14 days before the voting deadline, that the member's electronic device can successfully communicate with the online voting system.
• The bill also provides that a member voting electronically is counted as being in attendance at the meeting for purposes of determining a quorum, and for condominium and cooperative associations, a quorum established based on members voting electronically is only limited to the issue specifically identified in the electronic vote.
• In addition, the condominium, cooperative, or homeowner’s association's online voting system must be able to:
• Authenticate the member's identity.
• Authenticate the validity of each electronic vote to ensure that the vote is not altered in transit.
• Transmit a receipt from the online voting system to each member who casts an electronic vote.
• Permanently separate any authentication or identifying information from an electronic ballot for board elections, rendering it impossible to tie a ballot to a specific member
• Store and keep electronic ballots accessible to election officials for recount, inspection, and review purposes. 

• Process for electronic voting must be approved by board resolution.
• The board resolution must provide that members receive notice of the opportunity to vote through an online voting system, must establish reasonable procedures and deadlines for members to consent, in writing, to online voting, and must establish reasonable procedures and deadlines for members to opt-out of online voting after giving consent.
• Written notice of a meeting at which a board resolution regarding online voting will be considered must be provided at least 14 days before the meeting. 

• HOA Amendment Notice: Stat. § 720.306(1)(B)
• Generally, an HOA must provide each member with a copy of an amendment within 30 days of recording. However, in lieu of providing a copy of the recorded amendment, the HOA may provide notice to members that the amendment was adopted and identify the book/page number or instrument number of the recorded amendment. 
• This bill provides that the HOA’s failure to timely provide notice of the recording of the amendment does not affect the validity or enforceability of the amendment.

• Proxy – Amends Chapter 617 (not-for-profit corporations): Stat. § 617.0721
• No need for original proxies. A copy, fax, or other reliable reproduction of an original proxy may be substituted for any purpose for which the original proxy could be used. 

• “Official Records” Definition – Condos & Co-ops: Stat. § 718.111(12), 719.104(2)
• The bill specifies that “all other written records” of the condominium association, which are related to the association, are considered official records that must be maintained by the association. 

• Definition of “Governing Docs” – HOAs: Stat. § 720.301(8)
• Definition of “governing documents” for homeowner’s associations has been updated to include the “rules and regulations” adopted under the authority of the association’s declaration, articles of incorporation, or bylaws.
• For some reason “Governing Documents” is not a defined term in Chapter 718.

• “HOA Act” Stat. § 720.3015
• The bill defines Chapter 720 as the “Homeowners’ Association Act.”

• Extends Bulk Buyer until 2018 – Condos Stat. § 718.707
• Extended time limitation for classification from July 1, 2016 to July 1, 2018.

HB71 – Service Animal Bill

• Service Animal Accommodation
• This law specifically applies to “service animals” and NOT “emotional support animals.”
• Misrepresentations
• Although much of the bill reiterates rights and rules included in the Americans with Disabilities Act, it also makesmisrepresenting your pet as a service animal a second-degree misdemeanor.
• The punishment: 30 hours of community service for an organization that assists the disabled or other group decided by a judge. The community service must be completed within six months.

HB87 – Construction Defect Bill

• Definition of “completion of a building or improvement”
• Current law requires notice of a claim of defect AFTER a project is complete. The bill changes the definition to include a temporary certificate of occupancy.
• Changes the requirements for a notice of claim of an alleged construction defect
• Changes the requirements in the response to notice of claim
• Notice of claim to the contractor, subcontractor, supplier or designer must be made at least60 days before filing any action, or at least 120 days before filing an action involving an association representing more than 20 units.
• Response to the claim from a contractor, subcontractor, supplier or designer must be received no later than 15 days, or within 30 days for an association representing more than 20 units.
• Allows for claims to be made directly to the insurance carrier.
• Provide a mechanism for pre-suit exchange of information. 

HB643 – Condominium Termination Bill  - Fla. Stat. § 718.117

• A condominium may be terminated at any time if the termination is approved by 80 percent of the condominium's voting interests and no more than 10 percent of the voting interests reject the termination.
• The bill provides that if at least 80 percent of the voting interests are owned by a bulk owner, the following terms govern the termination:
• Unit owners must be allowed to lease their units if the units will be offered for lease after termination;
• Any unit owner whose unit was granted homestead exemption must be paid a relocation payment;
• Unit owners must be paid at least 100 percent of the fair market value of their units;
• Certain dissenting or objecting owners must be paid at least the original purchase price paid for their units;
• The outstanding first mortgages of all unit owners current on association assessments and mortgage payments must be satisfied in full;
• A notice identifying any person or entity that owns 50 percent or more of the units and the purchase and sale history of any bulk owners must be provided to owners; and
• A board with at least one-third of the members elected by unit owners other than a bulk owner must approve the termination. 

• The bill also makes changes to condominium termination proceedings that are not specific to those owned by bulk owners, including:
• If a condominium association fails to approve a plan of termination another termination may not be considered for 18 months;
• A condominium formed by a conversion cannot be terminated for five years, unless there are no objections to the termination;
• A plan of termination may be withdrawn under certain circumstances;
• A termination trustee may reduce termination proceeds to a unit for unpaid fines, costs, and expenses;
• Unit owners may only contest the fairness and reasonableness of the apportionment of the proceeds from the sale, that the liens of the first mortgages of unit owners will not be satisfied, or that the required vote was not obtained;
• An arbitrator may void a plan of termination if it determines that the plan did not apportion the sales proceeds fairly and reasonably, that the plan was not properly approved, or that the procedures to adopt the plan were not properly followed.

2016 Legislative Changes

SB130 – Discharge of Firearm In Effect Now

• Allows for criminal penalties for anyone who discharges a firearm in a residential area that has a density of one unit or more per acre.

SB184 – Military Service Personnel Rental Approvals

Signed and Effective July 1

• Requires Associations to complete processing of a rental application from a military service member within a specified time frame.
• Imposes a 7-day period on a condominium association or mandatory homeowner’s association to review the application and must notify the service member in writing.
• If denial of an application does not come in a timely manner, the Association must rent or lease the unit or parcel to the service member if all other terms are complied with.

SB498 – Repeal of the Cohabitation Ban In Effect Now

• Allows for the cohabitation of an unmarried man and woman, which is currently banned in s. 798.02 of the state’s criminal code.

2016 Legislation of Interest that Failed

HB203 – Estoppel Letters

• Companion bill with SB722
• Would revise the process for providing estoppel certificates by designating a specific response time, duration of certificate, and amount of the fee that can be levied.

SB792 – Amending rentals in HOA

• Tried to make it like condos with grandfather clause. HOA amendments that modified rental duration would only be applicable to those who consented to the amendment and to those who acquired a parcel or unit after the adoption of the new amendment.

Companion Bills HB653 and SB1502 – State Regulation

• Would have renamed the Division of Condominiums and provide for the regulation of mandatory homeowner’s associations.
• Would allow for the Division to assess an annual $4.00 per home fee payable to the Division.
• Would allow for the Division to conduct investigations and imposed penalties for violations.
• Revised the procedures for transition from developer control.
• Would regulate proxies and elections. 

Other misc. issues of interest that did not pass.

• Mandatory binding arbitration of homeowner’s association disputes (i.e. inclusion of HOAs in DBPR)
• Removing the exemption for less than 50 units related to audits, reviews and compilations. Accounting requirements would be based solely on revenues.
• Mandatory websites for condominiums and homeowner’s associations.
• Exempting covenants and restrictions from the Marketable Record Title Act (MRTA);
• Requiring payment plans for delinquent owners.

Case law Update 2015-2016

 Mortgage Foreclosure Statute of Limitations

• Deutsche Bank Trust Co. Americas v. Beauvais, 188 So. 3d 938 (Fla. 3d DCA 2016)
• “A dismissal without prejudice which does not adjudicate the merits of a first filed foreclosure action, similarly can do no more than terminate a lender's ability to collect on the underlying defaulted installment, again leaving the lender free to accelerate and file a subsequent foreclosure action for subsequent defaults.”
• What does that mean? IT MEANS THERE’S NO STATUTE OF LIMITATIONS FOR A MORTGAGE FORECLOSURE!

Safe Harbor Updates

• Catalina West HOA, Inc. v. FNMA, 3D15-217 (Fla. 3d DCA March 30, 2016)
• Safe harbor, Fla. Stat § 720.3085, does not include late fees, attorneys fees, etc., prior to the bank taking title. 

• Pudlit 2 Joint Venture LLP v. Westwood Gardens Homeowners Association, Inc., 4D14-1385 (Fla. 4th DCA May 27, 2015)
• If there’s a conflict between the safe harbor provisions in the HOA Declaration and the statute, the Declaration controls. 

Attorney-Client Privilege Discussions

• Las Olas River House Condo. Ass'n, Inc. v. Lorh, LLC, 181 So. 3d 556, 557 (Fla. 4th DCA 2015), reh'g denied (Jan. 26, 2016)
• In the course of the case, the owner asked the association to disclose all communications between the association, its attorney, and management. The owner argued that the association waived the attorney privilege when it included the manager in communications with the attorney.
• Surprisingly, the trial court agreed with the owner and ordered that all those communications be disclosed! The association appealed, and subsequently “won” the appeal but unfortunately this was no big victory. The appellate court told the trial court to reexamine the issue instead of ruling that these communications were inherently protected by the privilege. This leaves open the possibility that these communications may still not be protected.
• Put in your management contracts that the Association intents to extend the attorney-client privilege to you! 

Statute of Limitations to Challenge Amendment? 5 years

• Hilton v. Pearson, 2016 WL 517105 (Fla 1st DCA 10 2016)
• 5 years to challenge the process
• “A suit challenging the validity of an amendment to restrictive covenants must be filed within five years of the date that the amendment is recorded even if the suit alleges that the amendment was void because it was not properly enacted.” 

• Harris v. Aberdeen Prop. Owners Ass'n, Inc., 135 So. 3d 365, 369 (Fla. 4th DCA 2014)
• 5 years to challenge the interpretation or meaning of an amendment. 

Architectural Restrictions

• Leamer v. White, 156 So. 3d 567, 573 (Fla. 1st DCA 2015)
• Covenants state: “Ostentatious Site Features.  The construction of ostentatious site features such as topiary, sculpture, free standing fountains in the foreground of townhouses or lighting systems which may be offensive to adjacent neighbors is unacceptable.”
• What does that mean? Are all topiaries and sculptures ostentatious? Is whether something is ostentatious completely in the eye of your adjoining neighbor?
• Morale: Be very careful of the words used in your rules. They must be clear to all and cannot leave room for interpretation.

 If you have any questions on this subject or Homeowner's/Condo Associations, please contact the author, Brandon Burg.