Changes to Leasing Restrictions May Not Apply to All Owners

Q: Recently there was a discussion in my condominium association about amending our declaration to increase the minimum lease term from 30 days to 6 months. Many of our owners are in favor of this change, but we have been told it would not apply to current unit owners and would only apply to future owners. Shouldn’t the association be able to require 6-month leases? (N.A., via e-mail)

A: Generally, properly adopted amendments to the condominium documents apply to all unit owners, regardless of when they acquired title to their units. However, amendments which change rental rights are different.

The Florida Condominium Act, in Section 718.110(13), Florida Statutes, limits the ability of a condominium association to amend its documents to impose new rental restrictions. The statute states that “an amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment.”

Accordingly, if your association wished to adopt an amendment which increased the minimum lease term from 30 days to 6 months, it could do so pursuant to the amendatory procedures contained in the declaration of condominium. However, such an amendment would only apply to those unit owners who voted for the amendment or to unit owners who take title to their unit after the effective date of the amendment. Therefore, any unit owners who do not vote for the amendment would be entitled to lease their units pursuant to the current 30-day lease minimum. While this is the rule for condominium associations, Chapter 720, Florida Statues, the Florida Homeowners’ Association Act, does not contain a similar provision.

Q: Recently, my condominium association adopted its budget and at that meeting there was a membership vote to waive the funding of reserves. My condominium association waives reserve funding every year. However, isn’t there a legal requirement to have some minimum amount of money in reserves? (B.C., via e-mail)

A: Not if the association properly waives reserve funding on an annual basis.

Pursuant to the Florida Condominium Act, Chapter 718, Florida Statutes, a condominium association is generally required to adopt a budget with fully funded reserves. Pursuant to Section 718.112(2)(f)2.a., Florida Statutes, the association must have reserve funds for roof replacement, building painting and pavement resurfacing and reserve accounts for any other item that has deferred maintenance or a replacement cost that exceeds $10,000. Further, the statute states that the reserve funding must be computed using a formula based on the estimated remaining useful life of the subject asset and the estimated replacement cost or deferred maintenance expense for each reserve item.

As such, the default under the statute is that condominium associations must, on an annual basis, adopt a budget with fully funded reserves, based on the statutory requirements discussed above. However, the statute also provides that the association may waive or reduce reserve funding on an annual basis by a membership vote.

Therefore, if the association has properly voted to waive reserve funding, the association is not obligated to have any specific minimum reserve balance. However, if the association does not properly waive reserves, going forward, the association would have to adopt a budget with fully funded reserves as required by the statute.

Originally posted on floridacondohoalawblog.com. Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com

Trustee Likely Able to Serve on the Board

Q: I am the trustee of a trust that owns a condominium.  I want to run for the board of directors at the next annual meeting. My neighbor said that I will not be able to run because my name is not on the title. As the trustee of the trust that owns the condominium, am I qualified to run for the board? (C.M., via e-mail)

A: Probably. You should first review the association’s bylaws to see if there are any provisions addressing whether a trustee qualifies to be a director. If the bylaws are silent on the issue, Chapters 607 and 617, Florida Statutes (the “Florida Business Corporation Act” and the “Florida Not For Profit Corporation Act,” respectively) do provide some guidance. However, the answer may depend on whether or not you reside in the unit.

The Florida Business Corporation Act states that in the event the eligibility to serve as a member of the board of directors of a condominium association is restricted to membership in such an association, a grantor of a trust or a qualified beneficiary of a trust which owns a unit shall be deemed a “member” of the association and is eligible to serve as a director of the association provided that the beneficiary occupies the unit. The Not For Profit Corporation Act, which applies to all not for profit associations, has a similar provision.

Additionally, the Division of Condominiums, Timeshares, and Mobile Homes, the state agency which regulates condominiums and adjudicates most condominium election issues, has taken the position that where the association’s bylaws provide that a board member must be the owner of a unit, it is reasonable to interpret this language to apply to other current, legal interests, such as trustees. Therefore, unless there is something in your association’s condominium documents stating otherwise, you, as the trustee, would likely be eligible to serve as a director of the association.

Q: I was recently appointed to my homeowners’ association’s board of directors, and there are a number of questions that I and the other board members have. Particularly, is there any Florida law that states how many members of the board there must be? Additionally, how is the board supposed to address vacancies when a member of the board of directors resigns? (K.E., via e-mail)

A: For homeowners’ associations, governed by Chapter 720, Florida Statutes, the “Homeowners’ Association Act,” there is no guidance concerning the number of board members an association must have. Therefore, it would be necessary to review the governing documents for your association to determine if either the articles of incorporation or the bylaws define how many board members your association is supposed to have. Well-written documents will state with specificity the size of the board. Accordingly, in order to determine how many board members your association is supposed to have, it would be necessary to review the governing documents. However, for many associations the default position is five board members.

With regard to condominium associations, governed by Chapter 718, Florida Statutes, the “Condominium Act,” Section 718.112(2)1, states that in the absence of a provision in the bylaws specifying the number of board members, the board should be composed of five members unless the condominium has five or fewer units. This same section also provides that where the condominium has five or fewer units the board must consist of at least three members, unless the bylaws provide otherwise. Therefore, a condominium association with five or more units would have a five member board and one with five or fewer units would have at least a three member board, unless the bylaws provide otherwise.

With regard to filling vacancies, both Chapter 718 and 720, Florida Statutes, state that a vacancy on the board of directors may be filled by a vote of a majority of the remaining board members, unless the governing documents state otherwise.

Originally posted on floridacondohoalawblog.com. Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com

Beach Access Restricted?

Although summer is gone and fall is nearing its end, the truth is that even in the heart of winter we never truly have to wait long to enjoy the beach in Florida. The problem this year however is who can access the beach.

During the 2018 Legislative Session, the Legislature passed House Bill (HB) 631, relating to “Possession of Real Property.” The bill dealt with the causes of action known as ejectment, forcible entry, and unlawful detainer. The bill also included what turned out to be controversial change in the law related to “customary use,” which may impact the public’s right to access beach property. If your home or condominium is on the beach, you will be interested in this change in the law.

It is first important to understand that private property owners who live on the beach in some cases own lots that are platted to include the beach area between the dunes and the high-water mark. This could include condominium associations if the common elements or association property includes the beach.

Before the Legislature passed HB 631, counties were adopting “Customary Use Ordinances” which essentially allowed beach access on private property. It was then up to the property owner (this would include condominium associations) to challenge the customary use of their property by non-owners.

HB 631 requires counties to go through a new process in order to adopt a Customary Use Ordinance and places the burden on the county to establish the customary use over each privately owned parcel included in the ordinance. The bill essentially makes it more difficult for counties to adopt Customary Use Ordinances as it shifts the burden from the property owner who previously had to challenge the ordinance in court to the county which now has to establish the customary use truly does exist for that parcel.

If you or your condominium association own beachside property, there is still some dispute regarding how much power a property owner has to “kick out” someone using the beach. The opponents of the new law (primarily the county governments) have stated that the new law lets beachfront property owners “wall off” portions of the beach from the public. However, Representative Paul Renner, a proponent of the bill, wrote an article stating that through the courts, Florida law has recognized the public’s right to the “customary use” of that private property, and that the public can still have beach access if it is an area that has been customarily used by the public. Nevertheless, the new law has caused disputes between beachgoers and property owners and in some cases, law enforcement has been called to mediate disputes.

 

Originally posted on www.floridacondohoalawblog.com. Written by Yeline Goin.

Legal Tools at Your Disposal to Make Your Responsibilities as a Board Member Easier

I often find that there is an over-complication that some people believe goes hand-in-hand with their responsibilities in operating a condominium. Most forget that the statute and administrative code provide boards with some basic tools to assist in day to day operations.  This article will review some of these tools.

Unit owner participation at meetings.   The Condominium Act gives unit owners the right to attend board meetings and the right to speak on any topic on the agenda.  But what do you do about the disruptive owner?  The association may adopt written reasonable rules governing the frequency, duration, and manner of unit owner statements.  For example, if you want to allow a unit owner to speak for no longer than three minutes on any topic on the agenda, the board could create such a rule as well as others.

Unit owner audio and videotaping meetings. The Florida Administrative Code provides that any unit owner may tape record or videotape meetings of the board of administration, committee meetings, or unit owner meetings, subject to the following restrictions: The only audio and video equipment and devices which unit owners are authorized to utilize at any such meeting is equipment which does not produce distracting sound or light emissions.  The Administrative Code also permits associations to adopt the following as written rules in advance of the meeting: audio and video equipment shall be assembled and placed in position in advance of the commencement of the meeting;  anyone videotaping or recording a meeting shall not be permitted to move about the meeting room in order to facilitate the recording; advance notice shall be given to the board by any unit owner desiring to utilize any audio or video equipment.

Requests for official records. The association may adopt reasonable rules regarding the frequency, time, location, notice, and manner of record inspections and copying.  The key to this type of rule is to ensure that the rule is reasonable and permits access. There are a number of arbitration decisions dealing with condominium associations attempting to create rules that were too strict and unenforceable. Therefore, I recommend that you consult with your attorney before finalizing such a rule. You can also charge a reasonable amount for photocopies. That amount should be in the rule as well.

Written inquiries by unit owners.  On occasion you will have a unit owner send a list of questions to the board. The association can also control these inquiries. The board may adopt reasonable rules and regulations regarding the frequency and manner of responding to unit owner inquiries, one of which may be that the association is only obligated to respond to one written inquiry per unit in any given 30-day period. In such a case, any additional inquiry or inquiries must be responded to in the subsequent 30-day period, or periods, as applicable.  You may also limit the number of questions.

Originally posted on floridacondohoalawblog.com and written by Mark D. Friedman

Condos, HOAs, and Written Inquiries

Many times I see situations where an owner sends a community a certified letter seeking the answer to questions about various issues.  The nature and manner of the responses is dictated by the type of community. The Florida Condominium Act states that when a unit owner of a residential condominium files a written inquiry by certified mail with the board of administration, the board from the condominium association shall respond in writing to the unit owner within 30 days after receipt of the inquiry. The condominium association board’s response shall either give a substantive response to the inquirer, notify the inquirer that a legal opinion has been requested, or notify the inquirer that advice has been requested from the division. If the condominium association board requests advice from the division, the board shall, within ten days after its receipt of the advice, provide in writing a substantive response to the inquirer. If a legal opinion is requested, the condominium association board shall, within 60 days after the receipt of the inquiry, provide in writing a substantive response to the inquiry. There are penalties if these deadlines are not adhered to. It should also be noted that the condominium association may, through its board of administration, adopt reasonable rules and regulations regarding the frequency and manner of responding to unit owner inquiries.

In contrast, the Florida Homeowners’ Association Act contains no such similar provision.  As such, the HOA is not required under the statutes to respond to the certified inquiry. That being said, the HOA’s governing documents still need to be checked to confirm there is no requirement therein to respond to an owner’s certified inquiry. Even if not legally required, the HOA board should consider whether it is advisable to respond to the owner’s complaints in some manner as a proactive step to possibly help resolve a dispute rather than letting it escalate further.  This decision should come after seeking advice from the association’s counsel.

Originally posted on floridacondohoalawblog.com and written by David G Muller

Procedure To Convert To Pooled Reserves

Q: Can a condominium association board vote to convert from straight-line reserves to pooled reserves without a membership vote?  R.F. via e-mail

A: “Cash flow” funding of condominium reserves, often referred to as the “pooling” method of reserve funding, is a concept that was introduced many years ago through an amendment to the state’s administrative rules regulating condominium finances.  Under the traditional, “straight-line” method, required reserve contributions are calculated by using a formula that divides the cost of replacing a particular item by the number of useful years that item has left, minus the reserve funds on hand for that item, with the result being the amount to fully fund that item for the next fiscal year.  Each reserve component must be separately funded and must appear as a separate line item in the reserve schedule which is part of the budget.  Absent a majority vote of the unit owners at a duly called meeting, monies for each separate reserve item can only be used for that particular reserve item.

Under the pooling or cash-flow method, each reserve item is still separately funded but the money is put into one account. The reserve schedule computation is a bit more complicated and typically needs to be prepared by an accountant or reserve consultant.  The basic theory is that the association attempts to predict the year a particular asset will require deferred maintenance or replacement, and a mathematical formula is then applied to calculate required contributions for each year.  In theory, the money should be available when needed, with a lower contribution than required using the straight-line method.

A condominium association needs approval of the unit owners (i.e. a majority of the owners who vote at a meeting where a quorum is attained) to put existing straight-line reserves into the “pool.”  Once the vote to switch to pooled reserves is successful, no further votes would be required in future years and the association could continue to operate under the pooling method.

Q: My homeowners association is in a dispute with the landscaping company that was recently terminated for doing a bad job and for damaging common property.  The board advises that they are not going to sue the landscaping company because it will cost too much money and there is no way to recover the attorney fees incurred during the litigation.  Is the board right?  Is there no way to recover attorney fees in this type of dispute?  B.L. via e-mail

A: Since your association entered into a written service contract with this landscaping company, the terms of the contract will govern this dispute.  If the contract does not contain a provision allowing prevailing party attorney fees and costs in the event of a legal dispute, the association will likely have no ability to pursue these types of damages.  I use the term “likely” here because Florida Statutes do provide for the recovery of prevailing party attorney fees and costs in certain situations.  That being said, from the information you have provided, I doubt the association will have any statutory claim for prevailing party attorney fees and costs.

It is recommended that any contract the association enters into be first reviewed by the association attorney.  Many proposed contracts that I review on behalf of my association clients seem appealing because they are brief (one or two pages) but lack sufficient details and almost always favor the contractor.  A properly drafted contract will address important terms, including not only how you can terminate but issues like required insurance, indemnity for injuries, and the right to recover attorney fees if you have to go to court.

Attorney David G. Muller is a shareholder with the law firm of Becker & Poliakoff, P.A., Naples (www.beckerlawyers.com). The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this column does not create an attorney-client relationship between the reader and Becker & Poliakoff, P.A. or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

Originally posted by floridacondohoalawblog.com Written by David G. Muller is a Board Certified Attorney in Condominium and Planned Development Law with Becker & Poliakoff, P.A., which represents community associations throughout Florida, with offices in Naples, Fort Myers and 10 other Florida cities.  The Firm focuses a substantial amount of its practice on condominium and homeowners association law. 

Keeping Meeting Minutes Forever

How long is a condominium required to keep minutes of its meetings?   Prior to July 1, 2018 the answer was seven years.  This requirement had both its pros and cons.  Likely the biggest advantage was minimizing storage requirements, as months, years, and even decades of minutes add up, particularly for older communities or those that held monthly board meetings.  Conversely,  the manner or reasoning for certain board actions could not be verified after seven years. This left many boards to simply declare, “this is how it’s always been done” or owners to claim improper alterations had been approved by prior boards, which essentially impaired the ability of the association to enforce a covenant.

As of July 1, 2018, the requirement to keep minutes has changed.  Rather than seven years, minutes must now be kept forever.  This applies to all meetings of the association, whether of the board, members, committees, etc.  Essentially, the change applies to any meeting where minutes are taken.   Although the Legislature had its reasons for this change, concerns of storage nowadays are simply not the same given the advent of cloud storage.

What does this mean in terms of the good and the bad which may be lurking in the minutes?  On any given day what is written in the minutes could benefit or hurt the association.  Nonetheless, minutes are crucial to confirm the proper operation of the condominium.  That said, keep in mind that minutes should reflect who was present, motions made, and the logistics of the motion (who moved, seconded, and the vote).

Originally posted on floridacondohoalawblog.com and written by Marilyn Perez-Martinez

Special Assessment Leftover Funds Must Be Returned or Credited To Account

Q: Our condominium association board levied a special assessment for Hurricane Irma damage. Our insurance claim settled for more than we expected, resulting in an excess of funds due to the special assessment. What happens to this leftover money? (S.S., via e-mail)

A: Section 718.116(10) of the Florida Condominium Act provides that funds collected from a special assessment can only be used for the specific purposes for which the assessment was levied. Leftover funds are considered “common surplus” and may, at the discretion of the board, either be returned to the unit owners or applied as a credit toward future assessments.

Q: I am on the board of my condominium association. Several of the directors recently had a “workshop” session to understand the details of a major construction project that is coming up. The workshop was intended to be informational only. No votes were taken. Were we required to post notice of the workshop? (S.C., via e-mail)

A: The answer to your question depends on whether a quorum of the board was present at this gathering. While the law does not specifically address “workshops,” if there was a quorum of the board present, it was a “meeting” if association business was “conducted.”

It is widely accepted that votes need not be taken for a meeting to occur. In my opinion, the activity you describe involve the conduct of association business. On the other hand, if the majority of your directors attend an educational seminar, this is not a meeting as you are not addressing the business of your association.

Therefore, assuming a quorum of the board was present at this event, notice and an agenda should have been posted at least 48 hours in advance on the condominium property, and all unit owners should have been given the right to attend and speak, subject to any reasonable rules the board may have adopted governing unit owner statements at board meetings.

Q: My wife and I co-own a condominium unit. At the last election, we both ran for the board and were elected. Now, some of the directors say we both cannot serve at the same time, and have demanded that we choose which one of us will hold the seat. Is there a precedent on this? (J.O., via e-mail).

A: Section 718.112(2)(d)2 of the Florida Condominium Act states that in a residential condominium association of more than 10 units, co-owners of a unit may not serve as members of the board of directors at the same time, unless they own more than one unit or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.

Therefore, if your condominium consists of more than 10 units, if you and your wife only own one unit, and if there was a contested election, you both cannot serve on the board at the same time. Whichever of you received the greater number of votes would be the person who was actually elected, so you can’t simply choose between you. The person who received the next highest number of votes but was not considered elected, would take one of your seats.

It is also worthwhile to note that the law requires challenges to elections to be made within 60 days through an arbitration proceeding with a state regulatory agency. If the election was more than 60 days ago, I am not sure how that would play out since seating both you and your wife was what lawyers call “void ab initio,” meaning null and void from the start.

Originally posted on floridacondohoalawblog.com and written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. 

A Primer on Budgeting and Reserves

Few aspects of condominium and cooperative association operations are as heavily regulated as the budgeting process and yet too many boards take an informal approach to these crucial director functions.  From Section 718.504, which lists the required operating expense categories, to Section 718.112, which delineates the process and the requirements for reserve disclosures, budgeting, funding and use of reserve funds, to Section 61B-22 of the Administrative Code, which addresses even more detailed aspects of the process we can see how broadly the Florida Legislature has addressed budgeting and reserves.  Errors in the manner in which budgets and reserves are handled can subject associations to monetary penalties imposed by the State.

Budgeting is a process of estimating upcoming expenses.  On the operating side, most communities rely on prior years’ budgets and financial statements to develop the upcoming year’s budget for operating expenses.  The operating budget should be designed to meet the reasonably anticipated operating expenses.  All board members should do everything they can to deliver value to the members for their assessment dollars, but some boards make the unwise decision to keep assessments down artificially for political purposes at the expense of performing necessary maintenance.  When this occurs, the ultimate repair costs are usually higher because of the damage and deterioration that could have been avoided had repairs been done in a responsible and timely manner.  To put it simply, budgeting to properly maintain the community is, of course, a fiscal issue, and a planning issue, but it should not be a political issue. 

On the reserve side, many communities that went years or even decades without funding any reserves are finally starting to fund at some level and are considering the cash flow funding model over the component funding model, usually because the cash flow model funds a pooled reserve rather than a reserve fund in which funds are restricted for specific reserve assets rather than being available to use for any reserve asset.  For those communities without fully funded reserves, an accurate reserve study is the best defense against complaints over the inevitable special assessments needed to supplement underfunded reserves or fund projects for which the membership has voted to have no reserves. Boards that pull reserve estimates out of thin air are setting themselves up for future complaints and possible recall when the figures they chose prove wildly inaccurate.

There are too many communities that do not attach an accurate reserve schedule to the proposed budget, as required by Statute.  Usually this is because these communities have not obtained a reserve study from a reliable professional or, in an even worse scenario, have a reserve study and have chosen not to disclose its contents.  All board members and managers are encouraged to remember that the purpose of a reserve study is to allow the board to make accurate disclosures of the upcoming reserve expenses.  The purpose of the disclosure is to enable the owners  to know what expenses are coming up, but does not deprive the members of the right to vote each year to waive or reduce the funding of the reserve portion of the budget.  The assets for which reserve disclosures are required by law are the roof, paving and painting, regardless of cost, and any other component for which deferred maintenance or replacement cost will exceed $10,000.00.  Assets costing less than this dollar threshold can be aggregated for the purpose of reserve budgeting and the Administrative Code allows the board to create other reserves (other than those required by Statute).  For each reserve asset, the reserve schedule must disclose its estimated total useful life, estimated remaining useful life, estimated deferred maintenance or replacement cost, and for reserves funded on the component model, the estimated balance in the reserves for that asset at the end of the current fiscal year. 

This analysis applies to both condominiums and cooperatives (the citations above are for condominiums, but there are identical requirements for cooperatives in other portions of the Statute and Administrative Code).  Homeowners association are not subject to the same requirements unless the developer (before turnover) or a majority of the members (after turnover) vote to opt into the statutory reserve structure.

Preparing your operating budget and planning for reserves each year requires thoughtful deliberation as to the needs of the community both short and long-term.

Charging the Way: New Law Opens the Door for Electric Charging Stations in Condominiums

A recent amendment to Chapter 718, Florida’s Condominium Act, facilitates a unit owner’s ability to install and use an electric-vehicle charging station within their condominium. Section 718.113(8), Florida Statutes, which took effect on July 1, 2018, created a new provision stating that a declaration of a condominium or the board of administration of a condominium may not prohibit a unit owner from installing an electric vehicle charging station within the boundaries of the unit owner’s limited common element parking area, under certain circumstances. A unit owner’s “right” to install a charging stating is not, however, without limits. An association may require that the unit owner comply with all safety requirements, applicable building codes or recognized safety standards for the protection of the association property and its members. An association may also require the unit owner to engage the services of a licensed and registered electrical contractor or an engineer that is familiar with the installation and requirements of an electric vehicle charging station. An owner wishing to install an electric vehicle charging station may also be required to comply with any reasonable architectural standards adopted by the association that govern the dimensions, placement or appearance of the electric vehicle charging station. However, such standards cannot substantially increase the cost of installation.

The new law also provides for additional safeguards for the association. For example, installation of an electric vehicle charging station may not cause irreparable damage to the condominium property. The electricity for the electric vehicle charging station must be separately metered and paid for by the unit owner making the installation. Cost of installation, operation, maintenance and repair of the electric vehicle charging station, including hazard and liability insurance, is the unit owner’s responsibility. Additionally, an association may require the unit owner to reimburse the association for the actual cost of any increased insurance premium attributable to the electric vehicle charging station. The law also shields condominium associations from construction liens resulting from the installation of electric vehicle charging stations by unit owners.

The new law does not, however, say anything about what happens if the association voluntarily opts to install “common” electric vehicle charging stations. In other words, if a condominium association opts to install these “common” electric vehicle charging stations (after complying with the necessary legal requirements) it does not mean that unit owners no longer have the right to install their own charging stations. The new law also does not address who is responsible for any costs associated with upgrading the condominium’s electrical system if an upgrade is necessary to handle the increased electrical usage.

Originally posted on floridacondohoalawblog.com and written by Jennifer Horan