Summary of Changes Effecting Condominium Association
Provided by Dania S. Fernandez, Esq.
Dania S. Fernandez & Associates, P.A.
HB 1237 (SB 1246), sponsored by Rep. Diaz and Sen. Garcia and Sen. Rodriguez, passed the House and Senate this week and now heads to the Governor for consideration. If approved by the Governor, the new law will be effective on July 1, 2017 (except the provision regarding websites will be effective on July 1, 2018). The following is a summary of the bill:
- An officer, director, or manager may not solicit, offer to accept, or accept anything or service of value or kickback for which consideration has not been provided for his or her own benefit or that of his or her immediate family. If this provision is violated, it could result in criminal penalties.
- Forgery of a ballot envelope or voting certificate used in an election is punishable as provided in s. 831.01;
- The theft or embezzlement of funds of a condominium association is punishable as a crime as provided in s. 812.014;
- The destruction of or the refusal to allow inspection or copying of an official record in furtherance of any crime is punishable as tampering with physical evidence as provided in s. 918.13 or as obstruction of justice as provided in chapter 843;
- An officer or director charged by information or indictment with a crime referenced above must be removed from office and the vacancy shall be filled as provided in Section 718.112(2)(d)2. until the end of the officer’s or director’s period of suspension or the end of his or her term of office, whichever occurs first.
- If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or a director of any association and may not have access to the official records of ay association, except pursuant to court order.
- If the charges are resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term of office, if any.
- Bids for materials, equipment or services are an official record.
- The renter of a unit has the right to inspect and copy the association’s bylaws and rules.
- By July 1, 2018, an association with 150 or more units which does not manage timeshare units shall post digital copies of some of its official records on its website.
- To implement the website requirement, the DBPR is directed to include within the next condominium association annual fee statement a notice information condominium associations of 150 units or more of the requirement to create a website for association documents that is operational on or before July 1, 2018.
Conflicts of Interest
- An association may not hire an attorney who represents the management company of the association.
- A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure.
- An association, which is not a timeshare condominium association, may not employ or 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 a relative within the third degree of consanguinity by blood or marriage of a board member or officer. This does not apply if the board member or officer (or relative as described) owns less than 1 percent of the equity shares.
- A party contracting to provide maintenance or management services to an association after transfer of control of the association, which is not a timeshare condominium association, or an officer or board member of such party, may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure.
- If 50 percent or more of the units in the condominium are owned by a party contracting to provide maintenance or management services to an association managing a residential condominium after transfer of control of the association, which is not a timeshare condominium association, or by an officer or board member of such party, the contract with the party providing maintenance or management services may be cancelled by a majority vote of the unit owners other than the contracting party or an officer or board member of such party.
- Includes new conflict of interest provisions for directors and officers of an association that is not a timeshare condominium association, and the relatives of such directors and officers. They must disclose to the board any activity that may reasonably be construed to be a conflict of interest.
- A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice:
- A director or officer, or a relative, enters a contract for goods and services with the association.
- A director or an officer, or a relative, holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter a contract or other transaction with the association.
- If a director or officer, or a relative, proposes to engage in an activity that is a conflict of interest, the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the meeting agenda. If the board votes against the proposed activity, the director or officer, or the relative of the director or officer, must notify the board in writing of his or her intention not to pursue the proposed activity or to withdraw from office. If the board finds that an officer or a director has violated this provision, the officer or director shall be deemed removed from office. The vacancy shall be filled per general law.
- A contract entered between a director or an officer, or a relative, and the association, which is not a timeshare condominium association, that has not been properly disclosed as a conflict of interest or potential conflict of interest as required, is voidable and terminates upon the filing of a written notice terminating the contract with the board of directors which contains the consent of at least 20 percent of the voting interests of the association.
- For purposes of the conflict of interest provisions, the term “relative” means a relative within the third degree of consanguinity by blood or marriage.
- An association that operates fewer than 50 units must prepare a financial statement based on its total annual revenues (not just a report of cash receipts and expenditures).
- A unit owner may provide written notice to the division of the association’s failure to mail or hand deliver a copy of the most recent financial report within 5 business days after submission of a written request to the association for a copy of such report. If the division determines that the association failed to mail or hand deliver a copy of the most recent financial report to the unit owner, the division shall provide written notice to the association that the association must mail or hand deliver a copy of the most recent financial report to the unit owner and the division within 5 business days after it receives such notice from the division. An association that fails to comply with the division’s request may not waive the financial reporting requirement provided in the statute. A financial report received by the division shall be maintained, and the division shall provide a copy of such report to an association member upon his or her request.
- An association shall provide an annual report to the department containing the names of all the financial institutions with which it maintains accounts, and a copy of such report may be obtained from the department upon written request of any association member.
- An association and its officers, directors, employees, and agents may not use a debit card issued in the name of the association, or billed directly to the association, for the payment of any association expense.
- The use of a debit card issued in the name of the association, or billed directly to the association, for any expense that is not a lawful obligation of the association may be prosecuted as credit card fraud pursuant to s. 817.61.
- A board member may not serve more than four consecutive 2-year terms, unless approved by an affirmative vote of two-thirds of the total voting interests of the association or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.
- After an effective recall, the recalled board members shall turn over to the board within 10 full business days after the recall vote all records and property of the association in their possession.
- The statute still requires the Board to hold a meeting within 5 full business days after receipt of a written recall agreement (or within 5 full business days after adjournment of a recall meeting).
- The statute no longer requires the Board to “certify” or “not certify” the recall, but still appears to permit the Board to file a petition for recall arbitration challenging the recall.
Arbitration of Disputes
- The Division may but is not required to employ arbitrators.
- The Division may also certify attorneys who are not employed by the division to act as arbitrators and conduct the arbitration hearings provided in this chapter.
- A person may only be certified by the division to act as an arbitrator if he or she has been a member in good standing of The Florida Bar for at least 5 years and has mediated or arbitrated at least 10 disputes involving condominiums in this state during the 3 years immediately preceding the date of application, mediated or arbitrated at least 30 disputes in any subject area in this state during the 3 years immediately preceding the date of application, or attained board certification in real estate law or condominium and planned development law from The Florida Bar.
- Arbitrator certification is valid for 1 year.
- An arbitrator who does not maintain the minimum qualifications for initial certification may not have his or her certification renewed.
- The department may not enter a legal services contract for an arbitration hearing under this chapter with an attorney who is not a certified arbitrator unless a certified arbitrator is not available within 50 miles of the dispute.
- Upon determination by the division that a dispute exists and that the petition substantially meets the requirements of the arbitration statutes, and any other applicable rules, the division shall assign or enter a contract with an arbitrator and serve a copy of the petition upon all respondents.
- The arbitrator shall conduct a hearing within 30 days after being assigned or entering a contract unless the petition is withdrawn or a continuance is granted for good cause shown.
- The arbitration decision must be rendered within 30 days of the hearing.
- The arbitrator’s failure to render a written decision within 30 days after the hearing may result in the cancellation of his or her arbitration certification.
Suspension of Voting Rights
- Voting rights may only be suspended if the delinquent amount is more than $1,000 and more than 90 days’ delinquent.
- Proof of such monetary obligation must be provided to the unit owner or member 30 days before such suspension can take effect.
- A receiver may not exercise voting rights of any unit owner whose unit is placed in receivership for the benefit of the association.
- The Ombudsman may review secret ballots cast at a vote of the association.