Community Association 2017 Legislative Guide: Part II

Since we published Community Association 2017 Legislative Guide: Part I, several bills affecting community associations were signed into law, including Senate Bill 398 (estoppel bill) and House Bill 1237 (condominium crime bill).  Citing London’s Grenfell Tower fire, Governor Scott vetoed House Bill 653, which among other things, made it easier for high rise condominiums to opt out of expensive fire safety retrofitting requirements.  

In Part II of this legislative guide  we explore House Bill 1237, or what has been commonly referred to as the “condominium crime bill.”  

House Bill 1237 – F.S. 718.111, 718.112 & 718.3087

House Bill 1237 applies to all condominiums in the state.  It does not apply to homeowner associations. The law imposes criminal penalties on rogue boards, implements new laws related to conflicts of interest, and imposes several new requirements on condominium associations. Below we highlight the pertinent new laws:

718.111(1), (13) & (15) – Board Member Actions Subject to Criminal Penalties

• An officer, director, or manager may incur criminal penalties for soliciting or accepting any thing or service of value or kickback
• Forgery of a ballot envelope or voting certificate used in an election is punishable as a felony
• The theft or embezzlement of funds 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, may not serve as an officer or director of any association, and may not have access to the official records unless ordered by a court
• 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

718.111(3) & (9), 718.112(2), 718.3025 & 718.3027 – Provisions Dealing with 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 the association’s lien foreclosure or take title by deed in lieu of foreclosure
• A party contracting to provide maintenance or management services to an association or an officer or board member of such party, may not purchase a unit at the association’s lien foreclosure or take title by deed in lieu of foreclosure
• An 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
• 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 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
• Directors and officers of an association, and the relatives of such directors and officers, 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 into a contract for goods and services with the association
  • A director or an officer, or a relative, holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into 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
• A contract entered into between a director or an officer, or a relative, and the 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

718.111(12) & (15) – Provisions Relating to Official Records and Websites

• Bids for materials, equipment or services are an official record
• Tenants have the right to inspect and copy the association’s bylaws and rules
• By July 1, 2018, associations of 150 or more units must establish a website and post digital copies of some of its official records on its website.  The requirements for the website include:
  • An independent website or web portal wholly owned by the association; or obtains the right to operate a web page, subpage, web portal, or collection of subpages or web portals dedicated to the association’s activities and on which required notices, records, and documents may be posted by the association
  • The association’s website must be accessible through the internet and must contain a subpage, web portal, or other protected electronic location that is inaccessible to the general public and accessible only to unit owners and employees of the association
  • Upon a unit owner’s written request, the association must provide the unit owner with a username and password and access to the protected sections of the association’s website that contain any notices, records, or documents that must be electronically provided
• The notice of any unit owner meeting and the agenda for the annual meeting must be posted no later than 14 days before the meeting. The notice must be posted in plain view on the front page of the website, or on a separate subpage of the website labeled “Notices” which is conspicuously visible and linked from the front page
• The association must also post on its website any document to be considered and voted on by the owners during the meeting or any document listed on the agenda at least 7 days before the meeting at which the document or the information within the document will be considered
• Notice of any board meeting, the agenda, and any other document required for the annual meeting must be posted no later than the date required for notice pursuant to s. 718.112(2)(c)
• The association shall ensure that the information and records that are required to be kept confidential are not posted
• 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.

718.111(13) & 718.71 – Provisions Relating to Financial Matters

• Removed ability of condos operating less than 50 units and under a revenue threshold to prepare a report of cash receipts and expenditures in lieu of financial statements
• A unit owner may provide written notice to the division of the association’s failure to 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. Tge division shall provide written notice that the association must deliver a copy of the most recent financial report to the unit owner and the division within 5 business days.  An association that fails to comply with the division’s request may not waive the financial reporting requirement provided in the statute
• An association shall provide an annual report to the department containing the names of all of 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

718.112(2) – Provisions Relating to Board Term Limits and Recalls

• A board member may not serve more than four consecutive 2-year terms, unless approved by 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
• Recalls are now effective immediately as the statute no longer requires a board to certify a recall. A board still must hold a meeting within 5 business days after receipt of a written recall agreement

• The recalled board members shall turn over to the new board within 10 business days any and all records and property of the association in their possession

718.1255(4) – Provisions Relating to Alternative Dispute Resolution

• The Division may employ full-time arbitrators, but certify attorneys who are not employed by the Division to conduct arbitration hearings
• The Division may certify for a one year period a person 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
• 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 into 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 into 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 into 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

718.303(5) & (8) – Provisions Relating to Suspension of Voting Rights and Receivers

• An association may suspend the voting rights of a unit owner if the unit owner owes a monetary obligation that 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 takes effect

• A receiver may not exercise voting rights of any unit owner whose unit is placed in receivership for the benefit of the association

718.5012 – Provisions Relating to Ombudsman

• Ombudsman may review secret ballots cast at a vote of the association 

Check back in a couple weeks for Part III where we will examine the fate of House Bill 653 and the remaining bills signed into law affecting community associations.