2018 LEGISLATIVE UPDATE
This shall serve as Wasserstein, P.A.’s newsletter regarding recent legislative changes of which you should be aware. Please note that the following is only a summary of the key changes and updates that went/will go into effect July 1, 2018 (along with some color commentary). Please feel free to share it with your fellow board members and property managers!
CONDOMINIUM ASSOCIATIONS:
Official Records (Length of Time Records are Maintained): Certain official records must be kept from inception of the association. This includes:
(i) a copy of the plans, permits, warranties, and other items provided by the developer;
(ii) a copy of the recorded declaration of condominium and all amendments thereto;
(iii) a copy of the recorded bylaws and all amendments thereto;
(iv) a certified copy of the articles of incorporation and all amendments thereto;
(v) a copy of the current rules; and
(vi) all meeting minutes.
NOTE: 4 out of 6 of these items are the governing documents of the association. Those should not be any problem producing because a) of their importance and b) most, if not all of them, are recorded amongst the public records anyway. The real problem is this. Forever, the condo statute has required that associations maintain official records for 7 years (except election-related records, which only have to be maintained for 1 year from the election). Now, the legislature seemingly expects associations to conjure up documents like developer plans, permits and warranties, or meeting minutes, from decades ago that may very well have been lost to the pages of time. I am fairly confident that if an owner were to challenge an association founded in say 1980 for not maintaining meeting minutes from then until 2010 that the arbitrator/judge would find this new requirement to apply on a going forward basis and not retroactively (meaning at most, since this new law is going into effect in July of 2018, that the documents that have to be kept forever start with those from July of 2011 and forward). But who knows!
Official Records (Time to Allow for Inspection): Official records must be made available to an owner for inspection within 10 working days after receipt of a written request.
NOTE: Previously, the association only had 5 working days to make official records available. This change makes the condo statute consistent with the HOA statute with regard to the number of days to provide access to official records. The 5 working day requirement was a bit burdensome for associations to comply with, so this is a welcome change.
Website: The July 1, 2018 deadline for an association with 150 or more units to post digital copies of certain official records on its website (except in a timeshare condominium) has now been extended to January 1, 2019. Also, removed from the previous set of requirements for the website is the requirement to post any “proposed financial report” that will be considered at a meeting, and added instead is that the association must post any monthly income or expense statement to be considered at a meeting. Additionally, revised is the provision on “conflict of interest documents” regarding what must be posted and also the provision requiring that contracts all have to be posted on the website. Instead, a “summary” or “list” may be provided with regard to:
(i) all executory contracts (contracts that do not require immediate performance or require ongoing performance);
(ii) a list of bids received in the past 1 year (after the bidding has closed); and
(iii) summaries of bids which exceed $500 which must be kept on the website for 1 year (instead of summaries, the bids may be posted).
NOTE: Hooray for a delay! I just hope that the legislature does not continue to keep revising the documents that do and do not have to be posted. Who can keep track!
Conflict of Interest: Clarifications regarding a contract between the association and a director or officer, or their close relative, were reorganized and consolidated within the statute and include, in addition to other requirements, the following:
(i) The association shall comply with all requirements contained in 617.0832 and the disclosures referenced in that statute must be entered into the meeting minutes;
(ii) The contract must be approved of at least 2/3 of all directors present; and
(iii) At the next meeting of the members the existence of the contract must be disclosed to the members and if a motion is made by any member, the contract must be voted on and may be canceled by a majority vote of those present. If canceled, the association is only liable for the reasonable value of the goods and services provided through the date of termination and not for any other fees or penalties.
NOTE: Last year’s changes were a bit confusing and while consolidated, there is still not clarity. In one part of the statute it essentially states that there is a presumption of a conflict of interest (rebuttable) if a director, officer or relative contracts with the association, but that can be overcome provided certain disclosures are made and requirements met (so conflict of interest contracts are seemingly permissible). However, of note, the legislature left the language from last year pertaining to “service provider” contracts which still states that an association (except for a timeshare) may not 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 their relative (unless their ownership stake is less than 1%). So what are they saying here? It’s ok for the association to contract for roof repairs with a company owned by a Board member, but not with a security company owned by a Board member? Seems like a distinction without a tangible difference. Regardless, our recommendation is to avoid conflict of interest contracts. No matter how fair, reasonable, economically beneficial and legally implemented they may be, they always have the appearance of impropriety. Nike says Just Do It! When it comes to contracting with the association, Just Don’t Do It!
Financial Reporting: In the event an association fails to provide an owner with the most recent financial report within 5 business days after receiving a written request and then also fails to provide that same report to the owner within 5 business days of receiving an notice from the DBPR (“Department of Business and Professional Regulation”), Division of Condominiums, the association is prohibited from waiving the financial reporting requirement for the fiscal year in which the owner’s initial request for a copy was made and the following fiscal year as well.
NOTE: This is really just a clarification of the penalty. The prior version of the law did not specify the length of time that the association would be prohibited from waiving/reducing its financial reporting requirements. The new law clarifies that the punishment only extends for a maximum of 2 years. However, this should not really matter much to associations. First, associations should be complying with orders from the DBPR! No reason not to do so! Second, even if an association were not to comply, most associations do not waive or reduce their financial reporting requirements anyway, so the penalty is really not all that significant.
Board Meeting Notices: For meetings regarding special assessments, the “nature” of the special assessment no longer must be included in the notice. The notice must state that assessments will be considered and provide the “estimated cost and description of the purposes for such assessments”. Also, in addition to any other authorized means of providing notice, the Board may adopt by rule a procedure for conspicuously posting meeting notices and the agenda on the website, and for the electronic notice of such meetings. Additionally, any owner consenting to receive notices electronically is solely responsible for removing “spam” or other filters that may block their receipt of mass e-mails.
NOTE: With regard to special assessments, the prior version of the statute required disclosure of the nature, purpose and cost of the special assessment in the notice of meeting. First of all, who knows what the legislature actually intended when it asked us to describe the “nature” of a special assessment. But logically, if the special assessment is for something such as a new roof then the “nature” of the special assessment seems like it would be “a new roof” and the purpose of the special assessment would be to pay for the new roof. So, I’m not sure that removing the “nature” of the special assessment really has a tangible impact because how can one describe the “purpose” of a special assessment (what it’s paying for and/or why the work is being undertaken) without necessarily touching upon the “nature”? Ok, moving on to the second part of the change regarding electronic posting of Board meeting notices, the one real takeaway is that this is not in place of posting notice of the meeting on the condominium property. So, if an association opts into this procedure they are actually volunteering for more work as opposed to actually replacing an outdated form of notification with a more modern and easily disseminated one. Gotta crawl before we walk!
Term Limits: Board members can serve terms that are longer than 1 year if permitted by the bylaws or articles of incorporation. However, a Board member cannot serve more than 8 consecutive years, unless approved by 2/3 of all votes cast in the election or unless there are not enough eligible candidates to fill vacancies on the board.
NOTE: This legislation fixes 2 things from last year’s passage of term limitations. First, it makes the 8 consecutive year limit applicable regardless of the length of each term that added up to those 8 years. Second, it clarifies that a Board member who has served for more than 8 consecutive years can override the limitation if at least 2/3 of all votes cast in the election (not 2/3 of all voting interests) voted for them. While it’s great that the legislature made these clarifications, they failed to address the most significant unknown which is whether this legislation applies retroactively to “time served” and already accrued by a Board member, or instead if this is a going forward restriction that will not need to be addressed until 8 years from now. The DBPR has “informally” stated that it will not be retroactive, but until we have actual case law there is no reliable guidance on this very important question. Additionally, there is also still the possibility that at the end of the 8th year (or really at any other time during their tenure) a Board member could resign (and possibly even be re-appointed) and then contend that they did not serve 8 consecutive years in full, thereby making them eligible to continue to serve without limitation. For the record, just pointing this out-not encouraging it!
NOTE: The prior law suggested that only 1 or 2 year terms were permitted. Now it appears that Board members can serve any length of term provided that the length of term is authorized by the bylaws or articles of incorporation. So let me get this straight, on one hand the legislature is sending a clear message that they really do not want the same people to be on the Board for an extended period of time by implementing the 8 year limitation, yet at the same time instead of limiting the individual terms to 1 or 2 years they are now allowing the possibility of 3,4,5,6,7, or 8 year terms. Face meet palm.
Recalls: Clarifying last year’s changes, a recall is now only effective if it is “facially valid”. If not facially valid, then the Board may reject the recall at the statutorily required meeting and thereby force the unit owner representative of the recall group to file a petition challenging the Board’s determination of facial validity. Alternatively, if a recall is accepted by the Board as facially valid, then a recalled Board member may file a petition to challenge that determination. Also, there are now certain instances in which attorney’s fees may be awarded to the prevailing party.
NOTE: So what exactly makes a recall petition facially invalid? It is fair to assume that if the petition contains a number of ballots equal to less than a majority of all owners that would make it facially invalid. But what if the petition has more than enough ballots, but enough of those ballots are reasonably determined to be frauds or forgeries such that the number of legitimate ballots falls below the majority threshold? Hopefully the legislature adds language next year to specify what constitutes facial validity, or even better, a list of criteria that can be used to properly substantiate a determination of facial invalidity. Otherwise, the case law that will be derived from the DBPR over the next several years will have to suffice!
Material Alterations: Unless the declaration contains a different procedure, a vote of the unit owners must be taken before the material alterations or substantial additions are commenced.
NOTE: While the statute does not explicitly foreclose the possibility that an association can “ratify” a material alteration or substantial addition after the fact, it now seems that this practice will no longer be available. This is a big problem. Imagine your Board decides to change the roof from a foam roof to a rubber roof and that the declaration requires membership approval for all material alterations. Now, let’s further assume that even though this is a material alteration that the Board reasonably believes that this change in material falls under what is called the “necessary maintenance” exception, which would absolve the association of needing membership approval because it is using improved and longer lasting technology. The Board goes forward with the project, taking out a loan and passing a special assessment. Then an owner challenges the Board for not taking a vote of the membership and let’s say that the “necessary maintenance” exception is somehow not permitted and the arbitrator/court determine that the members should have been allowed to vote. Under the prior case law, the association could have been allowed to take an after-the-fact vote to ratify the material alteration and avoid the colossal waste of having to remove all of the new materials (while still also having to pay for them in full), as well as avoiding the additional cost of installing the old technology in its place. However, under this new law it appears that this may no longer be a viable option. Hopefully this will be repealed next year but if not, then associations may want to strongly consider amending their declaration to allow for after-the-fact ratification of material alterations.
Fining: The fining committee appointed by the Board must have at least 3 members who are not officers, directors, or employees of the association, or their spouse, parent, child, brother or sister. If a fine is approved by a majority of the committee the payment is due 5 days after the date of the committee meeting/hearing and the association must provide written notice of the approved fine.
NOTE: Aside from the 5 day waiting period for payment, which is wholly new, these changes are welcome because what they do is harmonize the condo statute with the existing fining procedures contained in the HOA statute. There really was no need for the two statutes to differ on these types of things. We can only hope that further changes like this are implemented in the future so that we can avoid unnecessary distinctions between condos and HOAs.
Electric Vehicles: A declaration of condominium, restrictive covenant or Board may not prohibit any unit owner from installing an electric vehicle charging station within the boundaries of the unit owner's limited common element parking area. The unit owner is entirely responsible for the costs of the charging station (which must be separately metered), as well as its installation, operation, maintenance, repair, insurance, and removal if no longer needed. It also cannot cause irreparable damage to the condominium. The association may impose certain requirements upon the installation and operation of the charging station, including, for example, that the unit owner comply with reasonable safety requirements, building codes and architectural standards adopted by the association governing charging stations, and that the unit owner use the services of a licensed and registered electrical contractor or engineer knowledgeable in charging stations. Labor performed on or materials furnished for the installation of a charging station may not be the basis for filing a construction lien against the association, but such a lien may be filed against the unit owner.
NOTE: It appears that the theme of this year’s body of legislation is technology and these changes are certainly a significant step forward. However, there are still holes in it. For example, why does this right to install a charging station only apply to limited common element parking areas? What about condos where the parking spaces are not limited common elements, but actually deeded properties themselves? If a unit owner wants to install a charging station within the boundaries of their deeded parking space is that not allowed? What if the boundaries of a deeded parking space or a limited common element parking space provide insufficient room for the equipment? Then what? Also, who pays to upgrade the condominium’s electrical grid/capacity to handle the increased usage of electricity? Still crawling before walking here, but that’s ok, especially when it’s in the right direction!
HOMEOWNERS ASSOCIATIONS:
Board E-Mails: Board members are permitted to communicate on association matters by e-mail, but cannot vote by e-mail.
NOTE: This language was implemented into the condo statute a few years ago, so this is another step towards harmonizing the condo and HOA statutes with one another. This provision is intended to foster discussion, but make sure that decisions are not being made via e-mail!
Amendments: A proposal to amend the governing documents must contain the full text of the provision to be amended with new language underlined and deleted language stricken. However, if the proposed change is so extensive that underlining and striking through language would hinder rather than assist the understanding of the proposed amendment, the following notation must be inserted immediately preceding the proposed amendment: "Substantial rewording. See governing documents for current text." Also, an immaterial error or omission in the amendment process does not invalidate an otherwise properly adopted amendment.
NOTE: This process for proposed amendments has been part of the condo statute for years so this is further evidence of the legislature’s effort to streamline and harmonize the two statutes.
Payments: Any payment on a delinquent account is applied first to interest, then any late fees, then to costs and attorney’s fees and lastly to assessments and this is regardless of any “accord and satisfaction” or allocation instructions placed on or accompanying the payment.
NOTE: As with amendments, this language regarding application of payments has been part of the condo statute for years and is now being replicated in the HOA statute. What I would like to see both statutes clarify further is that when applying the payment to the assessment portion of the debt, that the payments are to be applied to the oldest assessment first. While this is what most practitioners advise because it the fairest to the unit owner, the statute does not provide specificity.
Fining: If a fine is approved by a majority of the committee the payment is due 5 days after the date of the committee meeting/hearing.
NOTE: This 5 day provision was also added into the condo statute this year so the theme of unification of the condo and HOA statutes continues! It is a bit odd that the legislature chose to make the date of the meeting/hearing the measure of when the 5 days begins since the association is required to send a written notice of the approval of a fine to the owner and that notice may not be received by the individual within 5 days of the meeting/hearing, but hey, at least the two statutes are the same, right?
Elections: If an election is not required because the number of candidates is equal to or lesser than the number of open seats and assuming floor nominations are not required, those candidates become the members of the Board even if there is not a quorum to hold the annual meeting.
NOTE: There has been at least one case on this issue decided by the DBPR so this change is an effort by the legislature to further reinforce that where no election is actually needed because there are not more candidates than seats open, the existing Board cannot use the lack of a quorum at the annual meeting to roll the existing Board over and thereby prevent those candidates who timely submitted their applications from being seated as Board members. The reason this makes sense is that even if there had been a quorum, the result would have been that these individuals would have been elected by what is commonly referred to as acclimation. It wouldn’t have been a contest.
Preservation of Covenants: An association seeking to preserve its covenants may now record a summary notice which must contain specific information, a list of which is identified in the new statute, and for which the new statute also provides a form. A copy of this summary notice as filed with the county for recording must be included as part of the next notice of meeting or other mailing sent to all members. Additionally, each year at the first Board meeting which follows the annual meeting (but not including the organizational meeting), the Board must consider the desirability of preserving its covenants. This becomes effective as of October 1, 2018.
NOTE: A HOA’s recorded covenants are extinguished under what is called the Marketable Record Title Act (“MRTA”) if they are not “preserved” every 30 years. Previously, to preserve the covenants a specific notice of meeting had to be sent to all members 7 days prior to the Board meeting at which the issue would be considered and 2/3 of the Board had to vote in favor of the preservation at that meeting for it to pass. Then a certificate was prepared and recorded. This new legislation essentially removes the notice and meeting requirement, although a Statement of Marketable Title Action (which is contained in the statute and has been slightly updated) is still required to be sent to all of the members before recording the new summary notice. Please note that if the 30 year deadline has passed all is not lost. There is still a procedure referred to as “revitalization” which allows a HOA to essentially revive its extinguished covenants, but it requires a vote of the membership and a lot more paper work. Don’t let that happen! Instead, call a fantastic community association attorney to assist your community!
