Q: We have an owner who stopped paying their assessments to our condominium association. The association recorded a lien against the unit and foreclosed. The association was the only bidder at the foreclosure sale. Now some unit owners are saying that the board of directors acted inappropriately and there should have been a vote of the members before the association took title to the unit. They are saying that the association cannot purchase any kind of real estate without a vote of the members. Are they correct? (R.G., via e-mail)
A: Generally, a unit owner vote is required for the association to purchase real property. Section 718.111(7) of the Florida Condominium Act provides that the association has the power to acquire title to property and convey, lease or mortgage association property for the use and benefit of the members. However, the association may not acquire title to real property except as provided in the declaration and, if the declaration is silent, then the association must obtain approval of 75% of the total voting interests in the association.
There is a separate clause in the statute that addresses acquiring title to a unit following foreclosure of the association’s lien. Section 718.111(9) of the statute states that there is no limitation on an association’s right to purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments.
Therefore, while, a membership vote may be required for the association to take title to real property generally (including purchasing a unit on the open market), there is an exception for when the association is foreclosing its lien for unpaid assessments.
Q: My homeowners’ association recently sent out the annual financial statement. The statement is a “compiled” financial statement for the previous fiscal year. I questioned the board why we didn’t get an audit. The board said it did not want to have an audit and that an audit has never been done in the past. This seems outrageous. Isn’t every association required to have an audit performed at least occasionally? (W.O., via e-mail)
A: For homeowners’ associations, the level of year-end financial reporting that is required is dependent on the total annual revenues of the association. Under Section 720.303(7) of the Florida Homeowners’ Association Act, if an association has total annual revenues of less than $150,000, the association is only required to prepare a “report of cash receipts and expenditures.” If the association has total annual revenues of more than $150,000 but less than $300,000, it must prepare a “compiled” financial statement. If the association has total annual revenues of more than $300,000 but less than $500,000, it must prepare “reviewed” financial statements. Finally, if an association has total annual revenues of more than $500,000, it must prepare “audited” financial statements.
The statute also provides that the members may vote to reduce the required level of the association’s year-end financial report for a given year. For example, if the proper vote was taken, an association that is required to prepare an audit could prepare a cash receipts and expenditures report, compiled financial statements or reviewed financial statements, in accordance with the members’ vote.
The Board is also authorized to order more thorough financial reports than the statutory minimum. Further, the association’s governing documents may impose requirements more stringent than the statute.