A quote often attributed to the Prussian statesman Otto von Bismarck in the mid-1800s says something to the effect that laws are like sausages—it's better not to see either of them being made. It's a clever quip, and it's not entirely inaccurate, but the truth is that if you serve on the board of your condo, co-op, or homeowners association, or if you manage any kind of multifamily community, you should have at least some awareness of the laws and legislation affecting you, your neighbors, and the residents you serve. This awareness not only enables you to do your job better but it can help save your community money by planning in advance, avoiding fines, and keeping compliant with emerging regulations.
Echoes of the Recession...
The lingering effects of the recession and attendant foreclosure crisis were still evident in some of the community association-related legislation that the Florida Legislature considered during its 2014 regular session, which ran from March 4 through May 3.
Proposed changes to the state statutes dealing with condominiums, cooperatives, and homeowners associations would give associations additional rights to enter and maintain abandoned units, clarify 'joint and several liability' for payment of assessments and fees, and revise the safe-harbor limits that cap the assessments and fees banks owe when they foreclose and take possession of a unit.
These proposals were in the annual 'housekeeping' bill that updates the state's community associations laws: HB 807, sponsored by Rep. George R. Moraitis, Jr., (R-Ft. Lauderdale); and its companion, SB 798, sponsored by Sen. Jeremy Ring, (D-Margate).
The abandonment provision would authorize an association to inspect a condo unit that is in foreclosure and empty for more than two months, turn on its utilities, and repair and maintain it. According to Yeline Goin, an attorney with the Fort Myers office of Becker & Poliakoff and the executive director of the Community Association Leadership Lobby (CALL), “The bill also would give the association the ability to rent out such units to recoup its expenses.”
CALL represents the interests of the firm’s 4,000-plus community associations by monitoring and responding to legislation coming out of Tallahassee which significantly impact common ownership housing communities.
Joint & Several Liability
The joint and several liability provision explains that someone who buys a foreclosed-upon condominium must pay “all unpaid assessments that came due up to the time of transfer of title, as well as interest, late charges, and reasonable costs and attorney fees incurred by the association incident to the collection process.” Then the new owner can try to recover that money from the previous owner.
But what if a lending bank is slow to act and it's the association itself that forecloses on a unit that's deep in arrears? Previously, the association was treated as a previous owner and lost the ability to recover that money from anyone else—but the new provision changes all that.
“The association residents were out that money,” explains Julie Fishman, governmental affairs and community outreach liaison for the Community Advocacy Network (CAN) at the Katzman Garfinkel law firm’s Law and Learning Center in Margate. “Associations were being penalized for trying to move forward and making themselves whole. This provision would fix that.”
A law passed in 2013 provides that even if an association takes title on a foreclosed unit, it can still recover the unpaid assessments prior to the time it took title from the next owner. “We want to put that provision in the condo and co-op statutes,” says Goin. Initially it was only in SB 798, but co-op/condo lobbyists are seeking its inclusion in HB 807.
When a bank takes title to a foreclosed unit, a safe-harbor provision in the current law limits the bank’s responsibility for unpaid assessments and other fees to 12 months, or one percent of the mortgage debt—whichever is less. “Safe harbor negatively impacts the economics of the whole association,” says Travis Moore, a lobbyist and Florida’s Community Associations Institute’s (CAI) legislative representative. “The residents of a community are paying to maintain the bank’s assets.” Two sets of proposed bills sought to raise those safe-harbor limits:
HB 871, sponsored by Rep. Carlos Trujillo (R-Miami); and its companion, SB 1462, sponsored by Sen. Kelli Stargel (R-Lakeland), would increase the safe harbor provision to 24 months, or two percent with a $4,000 cap, plus up to $4,000 in association attorney’s fees.
HB 1405, sponsored by Rep. Kevin Rader (D-Delray Beach); and its companion, SB 1458, sponsored by Sen. Joseph Abruzzo (D-Wellington), would set the safe harbor at 24 months or three percent, but without adding attorney’s fees.
Perhaps unsurprisingly, the banks were expected to oppose those bills. “Anything that increases the banks’ liability will impact the lending climate in Florida, and probably won’t pass,” says Goin. “The banks don’t want to hurry these things along,” Moore adds. “The minute they take title, they owe everything, just like any other owner.”
Other Housekeeping Measures
Other measures of note included in HB 807 and SB 798 include:
Turnover of an association’s official records by outgoing board members. “Sometimes the board has difficulty in getting the documents back,” says Fishman. “This would provide for the same five-day time frame as when a director has been recalled.”
Technology adaptations. This provision would allow board members to be electronically “present” at meetings via FaceTime or Skype when they can’t attend in person, and would accept photographs taken and delivered by phone in place of physical copies.
Emergency powers. Currently, condo boards in a declared state of emergency have emergency powers. This provision would extend those powers to co-op and HOA boards as well. “If four of six board members leave town as a hurricane hits, the two remaining board members would be able to deputize other folks to serve as board members in place of the ones they can’t reach,” Fishman explains. “Associations have to be able to continue to operate and react in a very limited time frame. Without emergency powers, they can’t do that.”
Unauthorized Practice of Law
Is an attorney the only person legally able to send out a routine lien letter, or can a licensed community association manager do it? This and many other routine tasks are part of an ongoing debate between CAI and the Florida Bar Association over the unauthorized practice of law (UPL) by managers. On the one hand, if a manager does these things, the association need not pay lawyer fees—on the other hand, if what the manager does is illegal, he or she commits a felony.
In 1996, the Florida Supreme Court ruled that managers could legally perform 21 specific tasks, and set a standard for judging other activities. In 2012, the Florida Bar’s Real Property Probate & Trust Law Section (RPPTL—pronounced “reptile”) asked the Standing Committee on the Unauthorized Practice of Law to review the 21 activities and seek another Supreme Court opinion.
Since then, CAI and the Florida Bar have agreed upon certain activities that managers can legally perform. They are listed in two bills: HB 7037, sponsored by Rep. Ross Spano (R-Dover), and SB 1466, sponsored by Sen. Tom Lee (R-Brandon), chairman of the Judiciary Committee. According to Moore, differences in the two bills would have required reconciliation if both passed their respective chambers. The bills included blank forms for managers to fill in, with the understanding that “using a statutorily created form is not unauthorized practice of law.”
Moore notes that the state statutes now lack a definition of 'unauthorized practice.' “The Florida Supreme Court is the only one that can decide,” he says. “Case law, rules—things everybody agrees on have been determined in the past, and exemptions have been created. One exemption that CAI cares about should say if you’re operating under the auspices and purview of your state license, you should not be held liable for a felony—and in Florida, managers have a CAM license.” Something similar was in two other UPL bills: HB 7039, sponsored by Rep. Mike Hill (R-Pensacola Beach); and SB 1496, sponsored by Sen. Greg Evers (R-Pensacola). Both would exempt actions within the lawful scope of the practice of a business or profession regulated by the state.
This session, the Florida Legislature considered three bills that would allow private insurance companies to sell flood insurance in the Sunshine State: HB 581, sponsored by Reps. Larry Ahern (R-Seminole) and Heather Dawes Fitzenhagen (R-Ft. Myers); HB 879, sponsored by Rep. Ed Hooper (R-Clearwater); and SB 542, sponsored by Sen. Jeff Brandes (R-St. Petersburg).
“[The bills] would not create a public company like Citizens Property Insurance Corporation [which sells wind and homeowners’ insurance], but would encourage private insurers to offer flood insurance to compete with the National Flood Insurance Program (NFIP),” Goin says.
She goes on to explain that in the past decade, the Federal Emergency Management Agency (FEMA) incurred a $25 billion deficit due to catastrophic floods, including hurricanes Katrina and Sandy. To make the NFIP pay for itself, Congress passed legislation to raise flood-insurance premiums to a sustainable level nationwide. Private companies have said they can offer coverage in Florida at rates below those of NFIP—and these bills would authorize them to do so.
Subsurface Rights Disclosure
In Florida, the seller of a piece of property is permitted to retain what are referred to as 'subsurface rights' – meaning they can drill for oil or extract other underground resources from it, even if it's occupied by the new owner. To clarify what can often be a contentious issue between buyers and sellers, the state legislature considered three bills to require a clear disclosure statement in or attached to the contract for sale in such situations.
SB 1556, sponsored by Sen. Wilton Simpson (R-New Port Richey), deals specifically with mineral rights. HB 489, sponsored by Rep. Ross Spano (R-Dover); and SB 1032, sponsored by Sen. Greg Evers (R-Pensacola), cast a broader net, describing subsurface rights as “the rights to all minerals, mineral fuels, and other resources, including, but not limited to, oil, gas, coal, oil, shale, uranium, metals, phosphate, and water, regardless of whether they are mixed with any other substance found or located beneath the surface of the earth.”
“In committee, the bill was narrowed to cover only new home sales, effective July 1st,” says Fishman. “If a home has been sold nine or 10 times, it would be nearly impossible to track down the original developer to get this done. I don’t know to what extent it affects condos and co-ops, but it could have a huge impact on HOAs.”
Condos with no-pets policies often debate whether to allow service and emotional-support animals. HB 849, sponsored by Rep. Jimmie T. Smith (R-Lecanto); and SB 1146, sponsored by Sen. Thad Altman (R-Melbourne), would distinguish between service and emotional-support animals, but asserts that both must be allowed under Florida law.
The Americans with Disabilities Act (ADA) draws a distinction, mandating the allowance of service animals trained to perform specific, medically necessary functions—such as guide dogs for the blind and alert dogs for the deaf—but not comfort or emotional-support animals that have no special training. The federal Fair Housing Act, however, contains a broader definition of “assistance animal” that does include providing “emotional support” to persons with disabilities.
The Smith and Altman bills also say that associations may ask the owners of service and support animals for proof of compliance with vaccination requirements, and make fraudulent representation of the need for a service animal a second-degree misdemeanor. However, says Goin, “There will be some concerns by condo owners that this doesn’t need to be regulated. A body of law and cases already exists on this topic.”
Accessibility for HOA Boards
SB 1450, sponsored by Sen. Wilton Simpson (R-New Port Richey), would require HOA boards to meet in a location that is accessible to the physically handicapped. While few would argue against the inclusion of everyone in a meeting regarding their home and community, the logistics of compliance in some situations has given some folks pause.
“That’s really difficult in an association with 30 homes and no clubhouse that meets in board members’ homes,” says Fishman. “How can you regulate what you don’t understand? We’ve reached out to the sponsor to come up with something that fixes the issue so it won’t cost associations an arm and a leg to comply.”
While the intricacies of proposing, sponsoring, debating, and (maybe) passing legislation may not be the prettiest process to watch, it's part and parcel of running a co-op, condo, or HOA—and as such, boards and managers alike owe it to themselves and their communities to stay on top of the most pertinent developments.
George Leposky is a freelance writer and a frequent contributor to The South Florida Cooperator.
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