Monday, May 10, 2010

What changes will SB 1196 bring for HOA’s?

I have spent a lot of time discussing SB 1196 and the sweeping changes it will bring to condominium and cooperative associations throughout Florida. I have been asked by many of you what changes, if any, this bill brings for homeowners’ associations. There are far fewer changes for HOA’s in this bill but here is a summary of what HOA’s can expect to see if the Governor signs SB 1196 once it finally reaches his desk.

• Document inspection requests would have to be sent via certified mail, return receipt requested.
• In addition to being able to charge for copying costs on records inspection requests, HOA’s could also charge “any reasonable costs involving personnel fees and charges at an hourly rate for vendor or employee time to cover administrative costs to the vendor or association.”
• The disciplinary, payroll, health and insurance records of association’s employees would not be subject to inspection by owners.
• Social security numbers, drivers’ license numbers, credit card numbers, email addresses, phone numbers, emergency contact information, any addresses for an owner other than the property address or the address to which they request notice from the association be sent, and any other personal identifying information of any person (other than the person’s name, parcel designation, mailing address and property address) are exempt from inspection.
• Any electronic security measure that is used by the association to safeguard data including passwords are exempt from inspection.
• The software and operating system used by the association which allows manipulation of the data is exempt from inspection. The data, however, can be inspected.
• A majority of the total voting interests in the HOA can terminate a reserve account.
• If the association’s budget includes reserves for deferred expenditures and deferred maintenance but such reserves were not created or established by the membership, each financial report for the preceding fiscal year must include a disclaimer in bold font advising that the reserve funds are not subject to the restrictions on use of or calculation of such funds as set forth in the statute.
• Allows directors, officers or committee members to be compensated for performance of their association duties if the governing documents so provide or a majority of the voting interests approve such compensation in advance.
• The suspension of delinquent owners’ use rights can continue until the monetary obligation is paid (currently the statute provides that the suspension can last “for a reasonable period of time”).
• The HOA could lien for fines in excess of $1,000. If the association imposes a fine or suspension, the association must provide written notice of such fine or suspension by mail or hand delivery to the parcel owner and, if applicable, to any tenant, licensee or invitee of the parcel owner.
• If the governing documents so permit, absentee owners may vote by secret ballot for the election of directors by placing the ballot in an inner envelope with no identifying markings and mailing or delivering same to the association in an outer envelope bearing the name of the owner, the lot or parcel for which the vote is being cast, and the signature of the lot or parcel owner casting the ballot.
• Unless otherwise provided in the Bylaws, any vacancy occurring on the board before the expiration of a term may be filled by an affirmative vote of the majority of the remaining directors even if the remaining directors constitute less than a quorum or by the sole remaining director. Alternatively, a board may hold an election to fill the vacancy according to the election requirements set forth in the governing documents. Unless otherwise provided in the Bylaws, a board member appointed or elected under this section is appointed for the unexpired term of the seat being filled; this language would supersede what is currently found in Chapter 617 regarding vacancies.
• If a parcel is occupied by a tenant and the owner is delinquent in paying any monetary obligation due to the association, the association may demand that the tenant pay to the association “the future monetary obligations related to the parcel. The demand is continuing in nature, and upon demand, the tenant must continue to pay the monetary obligations until the association releases the tenant or the tenant discontinues tenancy in the parcel. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the parcel owner.”
• If the tenant prepaid rent to the owner before receiving the association’s demand and can provide written evidence of having paid such rent within 14 days after receiving the association’s demand, the tenant will receive a credit for the prepaid rent.
• The tenant will not be liable for increases in the amount of monetary obligations due to the association unless the tenant was notified in writing of the increase at least 10 days before the date on which the rent is due. The tenant shall be given a credit against rents due to the parcel owner in the amount of assessments paid to the association.
• If the tenant fails to pay the monetary obligations demanded by the association, the association may stand in the shoes of the landlord and sue for eviction under Chapter 83 of the Florida Statutes.
• The tenant does not have any rights to vote in an association election or to inspect the books and records of the association by virtue of paying the monetary obligations demanded by the association.
• An HOA may enter into agreements to acquire leaseholds, memberships and other possessory or use interests in lands or facilities, including but not limited to country clubs, golf courses, marinas, submerged land, parking areas, conservation areas, and other recreational facilities.
• An HOA may enter into such agreements regardless of whether or not the lands or facilities are contiguous to the lands of the community or whether such lands or facilities are intended to provide enjoyment, recreation or other use or benefit to the owners.
• Any such agreement not entered into within 12 months after recording the declaration may be entered into ONLY if authorized by the declaration as a material alteration or substantial addition to the common areas or association property. If the declaration is silent, any such transaction would require the approval of 75% of the total voting interests of the association.
• The declaration may provide that the rental, membership fees, operations, replacements, or other expenses are common expenses. The declaration may also impose covenants and restrictions on the use of these lands or facilities.
• An HOA board that is still controlled by the developer may not impose a special assessment before turnover unless a majority of the parcel owners other than the developer have approved the special assessment by a majority vote at a duly called special meeting of the members at which a quorum is present.

Some of the changes for HOA’s are beneficial, some might have enforcement challenges and a few are problematic. Liening for fines could become a slippery slope in some communities. The ability to take away someone’s home is quite a big hammer. Each HOA board will have to ask itself whether it is just to use such a big hammer to cure minor violations. Protecting sensitive identifying information as well as the association’s software system is a no-brainer. Other portions of the changes to the inspection exemptions are not as clear. Since the owners’ monthly payments contribute to employees’ salaries, shouldn’t those same owners have the ability to see what those employees earn and whether or not they have been subjected to disciplinary proceedings? Allowing the acquisition of substantial new lands or facilities that will be maintained as a common expense might be a very rude shock to a new owner in a brand-new community that did not contemplate such lands or facilities being a part of their lifestyle or a potential strain on their checkbook.

The HOA provisions in SB 1196 can be found on Pages 87-103. Again, the HOA provisions in this bill represent fewer than a quarter of the bill’s overall content although they have drawn scrutiny from certain quarters. The areas outlined above where the pendulum might have been pushed a little too far can hopefully be managed with good HOA governance and sound counsel.

8 comments:

  1. IS there something in this bill about new board members having to take a class within a certain amount of time of being elected.

    ReplyDelete
  2. Where can I get info on your Condo Boot Camp? Date, time, place, cost?

    The Prez

    ReplyDelete
  3. Our Board Member Boot Camps are free. They are held in various locations around the State depending on demand. To view video highlights from our last Boot Camp held in Hollywood, please visit www.boardmemberbootcamp.com.

    I am proud to announce that our Boot Camps have just been certified by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

    ReplyDelete
  4. I have a question about director secret ballot for condo HOA. We had a very unique situation where one candidate and 2 friends collected many proxy votes. During the secret ballot election, the only votes she received were her collected proxy votes and those 3 present members. She can't imagine how she lost because of the number of proxy that she and her friends submitted. She fell one short of winning. She is questioning the results and demanding to know # of proxy, # of persons present voting, and % of ownership that the total votes equal. I feel that with this information, she can deduce that those present did not vote for her compromising anonymity of ballot. State of Washington. What am I required to provide?

    ReplyDelete
  5. I am confused by several of your comments below. You refer to a "condo HOA" but there is no such creature. I am going to assume that your community is a homeowners' association because you cannot elect directors by proxy in a Florida condominium. You also reference "State of Washington" for no apparent reason. I am going to assume that your question pertains to a Florida HOA and not one located in Washington. Based on these assumptions, this individual would be entitled to see all materials related to this meeting and vote since they constitute part of the official records of the association under the catch-all provision found in Section 720.303(3) which provides as follows: (l)All other written records of the association not specifically included in the foregoing which are related to the operation of the association.

    ReplyDelete
  6. Actually, when the wording HOA is mentioned many of us think of the HOA (Home Owner Association) as the Single Family homes in Developements, not the Condo Associations (as in highrise or lowrise). There has always been a big difference between the two hasn't there? Or do both now fall under the same HOA rules? Co-ops are also different. . .

    ReplyDelete
  7. Are you saying in this post that a management company CAN CHARGE an inspection fee for a homeowner to review the HOA's official records? I know that a fee for copies can be imposed, but I was under the impression that a fee just for viewing the documents cannot be charged. Please clarify. Thanks!

    ReplyDelete
  8. Currently, Florida HOA's can charge for any labor involved with making copies of documents at an owner's request. The HOA Act does not empower them to charge an owner for the privilege of sitting and inspecting the records. The charge is tied to a request that copies be made. Many HOA's get this slight nuance in the law wrong.

    ReplyDelete