SIGNIFICANT 2004 STATUTORY AMENDMENTS

AFFECTING CONDOMINIUM AND HOMEOWNERS' ASSOCIATIONS

            A.        BACKGROUND

                        The 2004 Legislature entertained numerous proposed changes to the laws affecting condominium and homeowners' associations.  This was in large part attributable to the fact that a Select Committee was appointed to take public testimony and review current laws regulating condominium associations, and a Homeowners' Association Task Force was appointed at the request of the Governor in order to make recommendations for legislative changes concerning homeowners' associations and other related entities.  Numerous proposed amendments arose from the activities of the Committee and the Task Force; however, the proposals for changes to the condominium laws made by the Committee were largely rejected, while the recommendations of the Task Force were in large part adopted by the legislature.  This was primarily due to the fact that the Task Force was made up of a representative cross-section of professionals and other interest groups involved with homeowners' associations.  The Task Force ultimately produced a 46 page report, including proposed recommended legislation, which can be viewed at www.myflorida.com/dbpr/os/hot­_topics/hoa_taskforce.

                        Other than one monumental change relating to leasing restrictions, the amendments affecting condominium associations are not that significant.  However, there are numerous changes to the laws and procedures governing homeowners' associations, and many of these changes took effect immediately upon the legislation becoming law on June 23, 2004.  Therefore, all homeowners' associations need to give immediate attention to their existing procedures, and any pending matters which would be affected by the new legislation.

                        The comprehensive bill which was finally adopted relating to condominium and homeowners' associations represented a combination of many proposals and separate bills which had been proposed.  These legislative proposals were combined into Senate Bill ("SB") 2984, and once this Bill was approved by the Governor on June 23, 2004, it was designated as Chapter 2004-353, Laws of Florida.  It should be noted that there was another similar bill pending before the legislature.  The legislation in this bill became embodied in SB 1184, which was also adopted by the legislature and approved by the Governor.  However, since SB 2984 was approved after SB 1184, the later-approved Bill takes precedence, and this overrides the provisions which were contained in SB 1184 where there is a conflict between the two laws.  There were two proposals contained in SB 1184 (i.e. creation of a Condominium Ombudsman; and re-establishment of the Advisory Council on Condominiums) which will become effective due to the fact that these same provisions were not included in SB 2984.           

            B.        LEGISLATIVE CHANGES AFFECTING CONDOMINIUM ASSOCIATIONS

                        1.         Leasing Restrictions 

By far the most significant and far-reaching change which was adopted this year is a provision which will limit the ability of condominium associations to adopt restrictions relating to the rental of units after October 1, 2004, which is the effective date of all of the changes relating to condominium associations contained in SB 2984.  The wording of this amendment reads as follows: 

            "Any amendment restricting unit owners' rights relating to the rental of units applies only to unit owners who consent to the amendment and unit owners who purchase their units after the effective date of that amendment" 

This amendment was adopted in response to the decision of the Florida Supreme Court in Woodside Village Condominium Association, Inc. v. Jahren, 806 So.2d 452 (Fla. 2002), where the Court held that condominium associations could freely amend their condominium documents to modify the manner in which units could be rented, and that these changes could be applied to owners who had acquired their units prior to the amendments.  Under the new legislation, any amendment adopted after October 1, 2004 which restricts the rights of owners to rent their units will only be applicable to unit owners who consent to the amendment, and to unit owners who purchase their units after the effective date of the amendment. 

                                    There are several unanswered questions arising out of this amendment.  One issue is whether this new legislation will prohibit the adoption of rules and regulations by a board of directors, or changes to the bylaws or other documents, since the legislative change appears in the section of the Condominium Act relating to amendments to the Declaration of Condominium.  Another issue is how it will be determined who has consented to an amendment, and will therefore be bound by such an amendment.  These issues will certainly be clarified in due time, but all condominium associations need to immediately review their existing restrictions relating to leasing of units and determine whether they wish to propose any changes prior to the October 1, 2004 deadline.  Some of the more common amendments which might be considered by condominium associations, and which will no longer be permitted to be adopted as to non-consenting owners after October 1, 2004, include the following: 

(a)        Regulating the minimum leasing term; 

(b)        Regulating the maximum number of rentals per year or in any other time frame; 

(c)        Establishing or modifying requirements for approval or for the Association to have the ability to exercise a right of first refusal in regard to leases; 

(d)        Regulating renewals of leases; 

(e)        Establishing requirements for owners and tenants to sign a Lease Addendum form which protects the interests of the Association , and allows the Association  to directly enforce violations against tenants (this is an extremely important tool for any Association  that wishes to control leasing activities);

(f)         Establishing or modifying requirements for application fees in connection with leases, or regulating the amount of such fees (the authority for charging a fee must be contained in the Declaration or Bylaws of the Association, and many Associations establish a limit on the amount of the fee that can be charged rather than stating that an application fee can be established by the board of directors from time to time, up to the maximum amount permitted by law).  This type of amendment is critical at the present time.  If there is a limitation on the amount of the fee that can be charged in the governing documents which exist as of October 1, 2004, the application fee will never be allowed to be increased in the future as to any owners who do not consent to such change); and 

(g)        Establishing a maximum number of units that can be leased in the condominium, otherwise known as a leasing cap. 

The only type of leasing amendment that will be permitted after October 1, 2004 as to non-consenting owners is one which will only apply to future purchasers.  One of the most common amendments considered by many Associations is one which will prohibit future purchasers from leasing units during the first year or two of their ownership, in order to promote the acquisition of units by persons who intend to occupy the units.  This type of amendment will still be allowed.  Further, it appears that after October 1, 2004,  an Association will be able to consider an amendment that will prohibit any owners acquiring units after the effective date of an amendment to the Declaration from leasing their units at any time.  Although amendments of this character will give Associations some options for regulating leasing, after October 1, 2004 there will no longer be the right to consider the other types of amendments outlined above.  Any boards of directors that have questions regarding the sufficiency of their leasing restrictions should thoroughly consider this issue prior to October 1, 2004, and consider proposing amendments in order to let the unit owners decide whether they wish to modify the leasing restrictions while they still have a chance to do so. 

Although there has been some discussion as to whether the new law will prevent Associations from adopting new leasing restrictions prior to October 1, 2004, it does not appear to our Firm that there is any reasonable basis for such an argument, since the legislature has provided an effective date for the new law and has not indicated that the law is intended to apply retroactively. 

The other changes to laws affecting condominium associations in SB 2984 are not nearly as dramatic as the one relating to leasing restrictions.  These changes are summarized in the following paragraphs:

2.         Immunity for providing information to requesting parties 

A change was made to a provision which was enacted last year, allowing an association or its agent to charge a reasonable fee to a prospective purchaser or lender for providing responses to requests for information relating to the condominium.  That law provided that a charge of up to $150.00 may be imposed by the Association or its agent for completing questionnaires or providing requested information, in addition to the reasonable cost of photocopying and any attorneys' fees incurred by the Association in connection with the response.  The 2004 legislature has provided some immunity for the Associations and their agents, by stating that these parties are not  liable for providing this information in good faith, pursuant to a written request, if the person providing the information includes a written statement in substantially the following form:  "the responses herein are made in good faith and to the best of my ability as to their accuracy".  This wording should obviously be used in every response that is provided to prospective purchasers, lenders, or current unit owners, in regard to information about the condominium or the Association . 

3.         Defibrillators 

Section 768.1325 of the Florida Statutes has been clarified to provide limited immunity from civil liability to condominium, cooperative and homeowners' associations who acquire an automated external defibrillator (AED) device for use on the property.  These AED devices are becoming more and more popular; however, there still is some limited liability, and some steps that any Association should take if they wish to acquire such a device for use by the residents. 

4.         Retrofitting of condominium buildings 

Another change that was made to legislation which was adopted last year relates to the ability of condominium associations to vote against retrofitting certain portions of a condominium building with a fire sprinkler system or other engineered life-safety system.  The law previously had indicated that any such vote to forego the retrofitting must be accomplished by an affirmative vote of two-thirds of all voting interests, with an express limitation on obtaining such consent by proxy.  The law has been changed to allow votes to be obtained by use of a limited proxy, ballot, or a written consent form.  Additional details have been added regarding the notice that is to be sent to the owners before the membership meeting where this is to be considered, and as to action that is to be taken to notify owners of the results of the voting.  Similar changes were made for cooperatives.  We are not addressing cooperatives in any significant degree in this Update, due to the fact that most of the changes that were made to the condominium laws (including the leasing restrictions) were not also made to Chapter 719 of the Florida Statutes. 

5.         Question and Answer Sheet Required 

Another change made by the legislature was to reinstate the requirement that the "Frequently Asked Questions and Answers" sheet, currently required by Section 718.504 of the Florida Statutes, is again required to be provided to a prospective purchaser who has entered into a contract for the purchase of a condominium unit.  The law now requires the purchaser to be provided, at the seller's expense, with a current copy of condominium documents, as well as the most current year-end financial information for the Association, as well as the Statutory Questions and Answers sheet.  The law requires the Questions and Answers sheet to be updated annually.  This is a matter which should be calendared and attended to on an annual basis.  If there are any questions regarding the manner in which this sheet needs to be completed, please contact your Association attorney.  There have also been corresponding changes to the wording that must be contained in contracts as part of the disclosure requirements for resales of condominium units.  If all the required disclosure language is not contained in the contracts, or if all of the required documents are not provided, the contract for sale is voidable at the option of the purchaser prior to the time of closing. 

6.         Handrails and Guardrails 

Another change affecting condominium associations was adopted in a separate bill.  This was contained in SB 1728 which creates a new Section 718.1085 of the Florida Statutes.  This section provides that notwithstanding requirements of other codes or provisions of law, a condominium association is not obligated to retrofit the common elements, or units of a residential condominium, to comply with requirements related to handrails and guardrails, if the condominium meets the definition of "housing for older persons" and if the unit owners have voted to forego such retrofitting by the affirmative vote of two-thirds of the total voting interests in the affected condominium.  As in the law relating to retrofitting for life safety purposes, an Association may not vote to forego the retrofitting in common areas in a high rise building (which is defined as a building which is greater than 75 feet in height). 

As indicated above, Senate Bill 1184 was another comprehensive bill relating to condominiums.  This legislation contains many of the same amendments as those described in SB 2984.  The entire bill is effective October 1, 2004, but given the fact that SB 2984 was signed at a later date, the provisions in that bill will control where there is an overlap or conflict.  The provisions in this legislation which are not included in SB 2984 are as follows: 

7.         Advisory Council 

The Advisory Council on Condominiums, which was dissolved by the Legislature in 1982 due to ineffective activity, has been restored.  The Council is appointed by the Governor and certain leaders of the Legislature. 

8.         Ombudsman 

This is one of the most controversial measures in the new legislation which was promoted by the special house legislative committee on condominium laws.  Although weakened substantially from the original version, it includes a provision which empowers monitors appointed by the Ombudsman to oversee condominium elections. 

The Ombudsman will be a full-time attorney appointed by the Governor, as part of the Office of Condominium Ombudsmen in the Division of Florida Land Sales, Condominiums and Mobile Homes.  The powers and duties of the Ombudsman include reviewing Division operations and making recommendations for changes; acting as a liaison with unit owners, Directors, managers and others involved in the condominium process; and coordinating education in condominium matters.  Also, the Ombudsman may "recommend that the Division pursue enforcement action in any manner where there is reasonable cause to believe that election misconduct has occurred." 

The controversial provision regarding election monitors requires the Ombudsman to appoint a monitor of an Association election upon petition of 15% of the voting interests or six unit owners, whichever is greater.  The monitor shall be a Division employee, a Florida attorney or "a person specializing in condominium election monitoring."  The Association shall pay all costs of the election monitor.  The Division shall adopt rules regarding the monitor's role in the election process. 

As a result of this new law, Associations may find themselves in the difficult situation of having an election monitored by someone that need not necessarily be expert in the complex statutes and rules of condominium elections and the abundant precedent of Arbitration decisions, at the Association's expense.  That monitor, depending upon the rules which the Division ultimately adopts, may give direction to the Association in the conduct of the election which is at odds with what might be better advice from the Association's attorney or manager.  In the event the Association determines not to follow the monitor's direction, it risks enforcement action against the Association by the Division.  This appears to be an unnecessary and overbroad legislative intrusion into the election process, which works very well in the vast majority of cases. 

C.        LEGISLATIVE CHANGES AFFECTING HOMEOWNERS' ASSOCIATIONS 

                        SB 2984, which is now contained in Chapter 2004 - 353, Laws of Florida, contains extensive and far reaching changes relating to homeowners' associations.  As indicated above, many of these changes were adopted as a result of the recommendations of the Task Force that was created for the purpose of making recommendations on this subject.  It has been anticipated for several years that the laws relating to homeowners' associations would continue to be updated so that some of the provisions in the Condominium Act, which are felt to be appropriate for homeowners' associations, as well, would be incorporated into Chapter 720 of the Florida Statutes.

                        Some of the changes in the new law are not effective until October 1, 2004, while others became effective immediately upon its effective date, which was June 23, 2004.  It appears that sufficient thought was not given to the effective date of some of these changes, since they will impact actions that are currently in progress, and many Associations will have inadequate notice of the new requirements.  All homeowners' associations should immediately examine all pending procedures and rules, and also consider updating their governing documents, as a result of the legislative changes. 

CHANGES EFFECTIVE OCTOBER 1, 2004 

            1.         Revival of Expired Covenants

New Sections 720.403 through 720.407 of the Florida Statutes have been created to provide a mechanism for Associations to revive covenants which have expired.  Some covenants have expired by their own terms, since they failed to include language regarding automatic renewal, while other covenants may have been extinguished by the failure of an Association to take the necessary steps to extend the covenants and record a Notice under the Marketable Record Title Act ("MRTA"), which provides a requirement for the recording of a notice in the Public Records every thirty (30) years in order to prevent covenants from being involuntarily extinguished by operation of law.  Due to the volume of other changes which affect all homeowners' associations, we will not be addressing this particular issue in any detail in this Update.  If any Associations have questions regarding the terms and effect of the new law, they can review these portions of the new legislation, or consult their Association attorney. 

2.         Administrative Agency to Assist in Dispute Resolution 

One very significant change that has been made to Chapter 720 of the Florida Statutes is the introduction of an administrative agency which governs condominiums, cooperatives and mobile homes into the affairs of homeowners' associations.  The Division of Florida Land Sales, Condominiums and Mobile Homes in the Department of Business and Professional Regulation (the "Division"), has been given authority to become involved in dispute resolution in homeowners' associations, and a new finding has been added in Section 720.302 of the Florida Statutes which states:  

"homeowners' associations and their individual members will benefit from an expedited alternative process for resolution of election and recall disputes and pre-suit mediation of other disputes involving covenant enforcement …" .   

Even though this statement of purpose was included in a portion of the law which becomes effective October 1, 2004, as were provisions relating to recall of directors, the provisions relating to arbitration of election disputes, and mediation of covenant enforcement and other disputes, were made effective immediately upon the adoption of the law.  It appears that this is a "glitch" in the new law which will need to be clarified, since a Division representative has indicated that this agency is preparing for the implementation of the law as of October 1, 2004.  This will certainly cause some confusion in the interim.  The specific details of these particular legislative changes are discussed further below. 

3.         Special Enforcement Provisions for Associations with Fifteen or Fewer Units 

For those Associations which have fifteen or fewer parcel owners, a provision has been added to the law which states that these Associations "may enforce only the requirements of those deed restrictions established prior to the purchase of each parcel upon an affected parcel owner or owners".  The intent of the law appears to be to prohibit any amendments from applying retroactively to existing owners.  This legislative change will certainly cause a great amount of confusion in these smaller communities, and possibly lead to litigation and other disputes over the enforceability of this legislation.  It appears that the legislation may retroactively impair the contractual rights of the members to amend their documents, and may also be subject to other legal challenges. 

4.         Board Meetings 

Several changes have been made to the section of the Florida Statutes (Section 720.303(2)) which addresses board meetings.  These include:           

(a)        Although members of a homeowners' association do not generally have the right to speak at meetings of the Board of Directors, a procedure has been provided allowing members to petition the Board to address an item and permit the members to speak regarding the particular issue.  The new law provides that if 20% of the total voting interests petition the Board to address an item of business, the Board is required, at its next regular Board meeting, or at a special meeting of the Board not later than sixty (60) days after receipt of the petition, to place the petition item on an agenda.  The Board must then provide all owners with notice of the meeting, and in regard to the portion of the Board meeting that was requested by petition, members have the right to speak on these issues for at least three minutes each.  The Association has the right to require that any member wishing to speak must sign up in advance, and other than addressing the petitioned item at the meeting, the Board is not obligated  to take any other action requested by the petition.  This change, therefore, gives owners a rather limited right to force the Board to allow a matter to be discussed at a Board meeting, with owner participation.  The general rule remains that at homeowners' association Board meetings, other than those held in response to a petition, the members do not have a legal right to speak at these meetings.  This is unlike condominium association meetings, where members are expressly permitted to speak on all agenda items. 

(b)        A new requirement has been added for notices of board meetings where special assessments will be considered, or where rules which regulate the use of parcels in the community will be considered. This is similar to a requirement which currently applies to condominium associations.  At any meetings where special assessments or rules concerning the use of parcels (as opposed to the common areas) will be considered, the Association is required to provide written notice to all members at least fourteen (14) days prior to the meeting, as well as to post a notice on the property.  Notices must include a statement that changes to the rules concerning the use of parcels will be considered.  The wording does not require that the specific language of the proposed rule be included in the notice.  In many sections of the statutes there is now reference to giving notice by electronic transmission to the members.  This results from a change made by the 2003 legislature which allows notices to be delivered by electronic transmission (e.g. electronic mail) but only where such notice is authorized by the governing documents of the Association, and where the owner has consented to receive notices through this medium.  This will certainly be a trend in the future, and it is suggested that Associations consider amending their bylaws to allow notices to be given by electronic transmission so that they will be in a position to implement electronic mail when they are prepared to do so. 

(c)        In regard to meetings of the Board, a new exemption has been added addressing those type of meetings that must be open to the owners.  The new law states that notwithstanding any other requirements of law requiring board and committee meetings to be open to the members, that such requirements are not applicable to certain meetings held for the purpose of discussing personnel matters.  Our Firm and many other practitioners have long felt that issues relating to Association personnel matters should not be required to be discussed in an open meeting, and that records relating to personnel should not be required to be made open to inspection by all owners.  Some of these matters present very sensitive issues and make it more difficult for the Board of Directors to effectively manage the community.  The law relating to homeowners' associations has now been changed to allow certain meetings to discuss personnel matters to be closed, and records relating to personnel matters to be excluded from the list of official records that must be made available to all owners.  The same changes have not been made to the condominium laws, but perhaps they now will be considered further in light of this new legislation. 

5.         Official Records 

Section 720.303(4) of the Florida Statutes has been changed in regard to what constitutes official records.  Now included as part of the official records is the disclosure summary for the community which is required by the new Section 720.401(1) of the Florida Statutes (discussed below).  Even more significantly, a new catch-all provision has been added to say that in addition to those records that are specified in the statute, the official records include "all other written records of the Association not specifically included in the foregoing which are related to the operation of the association".  Similar language is included in the Condominium Act, but has not previously been applicable to homeowners' associations.  This will mean that owners living within homeowners' associations will have greater access to any written records relating to Association operations, except for the items which are specifically excluded in another section of the law.  These exclusions include: 

 (a)       Records protected by the attorney-client and work-product privilege, which essentially relate to confidential communications between the attorney and the client, or records prepared by an attorney or at the attorney's direction relating to strategy or theories in regard to litigation or arbitration proceedings; 

 (b)       Information obtained by the Association in connection with the approval of the lease, sale or other transfer of a parcel; 

 (c)       Disciplinary, health, insurance, and personnel records of the Association's employees (this is an entirely new exception and contains very broad wording to protect the records of the employees of the Association, but it does not appear to extend to certain independent contractors or other agents of the Association who may not be classified as "employees"); and 

(d)        Medical records of parcel owners or community residents. 

                        Significant changes have also been made to the section of the law relating to inspection and copying of  Association official records.  These changes include: 

(e)        A provision which states that if the Association has a photocopy machine available where the records are maintained, it must provide parcel owners with copies upon request at the time of the inspection, if the entire request is limited to no more than twenty five (25) pages.  The Association is now given the right to charge up to 50 cents per page for copies made on the Association's photocopier.  If the Association does not have a photocopy machine available where the records are kept, or if the records requested to be copied exceed twenty five (25) pages in length, the Association may have copies made by an outside vendor, in which case the actual cost of copying is to be charged.  Presumably, the Association may also choose to make the copies itself and charge the owner at the rate established by the Board of Directors, up to the maximum amount of 50 cents per page.  The condominium laws have long provided that an Association may only charge up to twenty five (25) cents per page, and this new change to the homeowners' law may lead to an increase in the amount that condominium associations are allowed to charge in the future. 

(f)         Specific wording has now also been added to indicate that an Association may not require an owner to state any reason for the inspection, or to demonstrate any proper purpose for the inspection.  Many states have requirements whereby owners are required to show a proper purpose before they are entitled to inspect and copy records, but Florida has never adopted this approach. 

(g)        Finally, a provision has been added addressing reasonable rules which can be adopted by an Association to govern the inspection of records.  Associations cannot limit an owner's right to inspect records to less than one 8 hour business day per month.  Presumably, if the association can only provide the owner with access for less than 8 hours on one day, then the session is to be continued to another day.  It is interesting to note that the interpretations of the rights of access to condominium records, as reflected in the Arbitration Decisions issued by the Division, have held that limiting an owner to one request per month is unreasonable.  Once again, perhaps this new legislation will result in a similar guideline being established for condominium associations, which currently have no specific guidelines in regard to the number of requests that can be made each month for access to records.  It should be noted that limitations regarding the frequency, time, location and other details of records inspection are required to be contained in written rules adopted by the homeowners' association.  Most homeowners' associations do not have such rules and they should strongly consider these, especially if they incur frequent requests for access to records.  Associations also should establish a written charge that will be imposed for owners who request the Association to make copies of records. 

6.         Financial Reporting Requirements 

Significant changes have also been made to the year-end financial reporting requirements for homeowners' associations.  The law previously provided that an annual financial report was to be prepared within sixty (60) days after the close of the fiscal year, and that the report needed to contain basic information regarding cash receipts and expenditures.  Now, however, the financial reporting requirements for homeowners' associations have been changed so as to be very similar to those which apply to condominium associations.  The reporting requirements are based upon the total annual revenues of the Association, and an Association with annual revenues between $100,000.00 and $200,000.00 is required to prepare compiled financial statements; if the revenues are between $200,000.00 and $400,000.00, the Association is required to prepare reviewed financial statements; and if the revenues are in excess of $400,000.00, then audited financial statements are required.  Any Association with total revenues of less than $100,000.00 is to prepare a report of cash receipts and expenditures, unless the owners vote for a higher level of accounting.  The law also provides that if the community contains less than fifty (50) parcels, regardless of the annual revenues, the Association is to prepare a report of cash receipts and expenditures in lieu of other financial statements, unless the governing documents provide otherwise.  A new provision has also been added which would now allow the financial reporting requirements discussed above to be modified by the owners.  It should be noted that even though the financial reporting requirements outlined above can be waived by a vote of the members, as discussed below, any such waiver does not affect any provision in the governing documents which requires a higher level of reporting (e.g. if the bylaws require an audit to be performed, then regardless of the amount of revenue which the Association receives, the Association must provide the audit unless the bylaws are amended). 

In regard to changing the reporting requirements, a majority of the voting interests present at a properly called meeting of the Association may vote for a lower level of financial reporting requirements than those that would otherwise be called for by the guidelines.  This is a provision that mirrors the procedures for condominium associations.  However, a new change to the law allows twenty percent (20%) of the parcel owners to petition the Board of Directors for a level of financial reporting higher than that required by the guidelines.  Upon receipt of such a petition, the Association is required to hold a meeting of the members within thirty (30) days for the purpose of voting on raising the level of reporting for that fiscal year. 

7.         Use of Association Funds by Developers 

The new law provides that Association funds may not be used by a developer to defend a civil or criminal action or any administrative proceeding that has been filed against the developer or directors appointed by the developer. 

8.         Recall of Directors 

The rules and procedures for recalling directors in homeowners' associations have been modified to essentially follow the requirements currently contained in the Condominium Act.  The new law clarifies that HOA directors may be removed, with or without cause, by a majority of the entire voting interests.  There are detailed provisions relating to how agreements in writing are to be structured, and how all aspects of the recall procedure are to be undertaken.  In the past, there were no guidelines as to how homeowners' association recalls were to be conducted, other than the very minimal wording which was contained in Chapter 617 of the Florida Statutes.  The new laws provide details relating to the manner in which voting must be conducted; consideration of recall petitions by the Board of Directors; allowing agreements or ballots used in an unsuccessful effort to be re-used in a second recall effort; and many other details that need to be reviewed if any Association is addressing this issue. 

Section 720.304 has also been amended in several respects:   

9.         Flags 

            A homeowner's right to display a flag has been expanded upon.  In addition to being allowed to display one portable, removable official flag of the United States, a homeowner may now display a portable, removable official flag of the State of Florida in a respectful manner at any time.  Also, on Armed Forces Day, Memorial Day, Flag Day, Independence Day and Veterans Day, an owner may display in a respectful manner a portable, removable official flag, not larger than 4.5 feet by 6 feet, which represents the United States Army, Navy, Air Force, Marine Corps or Coast Guard, regardless of any provision in the Declaration or other requirements dealing with flags or decorations.  It should be noted that Associations must have rules or restrictions which limit the right of owners to display flags or other decorations if they wish to prevent owners from displaying any type of flags or decorations other than that specifically addressed by the statute. 

10.       SLAPP Suits 

            An interesting provision in the new legislation is one which prohibits "Strategic Lawsuits Against Public Participation", otherwise known as "SLAPP" suits.  These are stated to occur when a member is sued by individuals or a business organization due to the owner/member's appearance and presentation before a governmental entity on matters related to the homeowners' association.  A good example of this would be an owner who is opposing some type of zoning or land use change.  It is stated to be the public policy of the State that business organizations and individuals not bring such suits against these individuals, given the fact that such suits are inconsistent with the right of owners to participate in the governmental process.  Therefore, if any owner has such a suit filed against him, the owner is entitled to file a claim and obtain an "expeditious resolution" of such claim in regard to whether the lawsuit against him violates this section of the law.  The court may award damages, including the possibility of triple damages.  The court may also award costs and attorneys' fees in connection with the claim that a suit was filed in violation of this section.  Homeowners' associations are also prohibited from expending association funds in bringing such a suit against an owner. 

11.       Access Ramps 

            A change which appears to have been unnecessary was added to the new law, stating that any parcel owner may construct an access ramp if an occupant of that parcel has a medical necessity or disability that requires a ramp for ingress and egress under certain conditions.  The conditions include the requirement for establishing the medical necessity or disability of the resident, and the need for the ramp.  There is also a requirement that plans for the ramp must be submitted in advance to the homeowners' association and the homeowners' association may make reasonable requests required by the applicant to modify the design.  The need for this legislation is questionable, since this entire subject matter is covered by Federal and State Fair Housing Acts, in relation to the need to reasonably accommodate someone with a disability, and the provisions included in the new statute are slightly inconsistent with the administrative rules implementing these Acts.  Both laws will need to be consulted if this issue arises. 

12.       Security Signs 

Finally, any parcel owner is given the right to display a sign of "reasonable size" provided by a contractor for security services, provided that the sign is located within ten (10) feet from the entrance to the home.  This provision would overrule any restrictions which prohibit owners from installing such signs.

CHANGES WHICH ARE EFFECTIVE IMMEDIATELY FOR HOMEOWNERS' ASSOCIATIONS 

As noted above, some portions of the law were made effective October 1, 2004, while others were effective immediately upon the law being signed by the Governor and filed with the Secretary of State.  This occurred June 23, 2004.  Accordingly, all of the following changes are currently in effect and must be complied with immediately. 

            13.       Fines 

Condominium law provides that a fine may not become a lien against property, but the courts have previously interpreted homeowners' association law to allow homeowners' associations to file liens against property for unpaid fines.  This of course was of considerable assistance to the Associations in connection with the collection of fines, but it was apparently felt that the authority of the Board of Directors to lien the property for this purpose might lead to over-reaching.  The new law states that a fine "shall not become a lien against a parcel".  There is some question as to whether the new statute can be retroactively applied to existing Associations whose governing documents permit them to file liens to secure fines, and this issue will need to be tested in the courts.  The general rule is that new legislation is not supposed to retroactively impair contract rights which previously existed, and the contents of a Declaration of Covenants are considered to be a contract for many purposes.  Although prohibiting liens from being filed, the new statute does state that in any action to recover a fine, the prevailing party is entitled to collect reasonable costs and attorneys' fees.  We generally recommend wording in the governing documents which states that all costs and attorneys' fees incurred in connection with the imposition of the fine and the collection of the fine are recoverable.  We would also like to note that we have seen many homeowners' associations which do not properly follow the notice and hearing requirements contained in the statutes.  If these requirements are not followed, the fines may be held to be invalid, and this may expose the Association to attorneys' fees or other adverse consequences.  It is suggested that the forms and procedures being utilized by the Association should be reviewed by legal counsel if the Association is involved in the fining process. 

14.       Competitive Bidding   

A new Section 720.305(5) of the Florida Statutes has been added, once again based upon precedent which exists in the Condominium Act.  This section provides that if a contract for the purchase, lease or renting of materials or equipment, or for the provision of services, requires payment by the Association in excess of ten percent (10%) of the total annual budget of the Association, including reserves, the Association must obtain competitive bids for the material, equipment or services.  The Association is not required to accept the lowest bid.  This ten percent (10%) threshold differs from the five percent (5%) rule which applies to condominium associations, so fewer homeowners' association contracts will be subject to mandatory competitive bidding.  The statute also states that any contract which is required to be the subject of competitive bidding, or any contract that is not to be fully performed within one (1) year, is required to be in writing.  There is an exemption for contracts with employees of the Association, and contracts with attorneys, accountants, architects, community association managers, engineers, and landscape architects, and competitive bidding is not required in regard to these contracts.  The statute goes on to say that any contract executed before October 1, 2004 is not subject to the competitive bidding requirements of this Section, and any renewal of a contract that was awarded under the competitive bidding procedures, is not required to again be subjected to competitive bidding, if the contract contains a provision that allows the Board to cancel the contract on thirty (30) days notice.  The new law provides that if the Declaration or  Bylaws governing the Association provides for competitive bidding for services, the Association may operate under the provisions of its documents if those provisions are at least as stringent as the requirements of this Section.  There are exceptions for associations obtaining products or services in an emergency, or where there is a single supplier. 

15.       Notice of Membership Meetings and Related issues:         

More detailed provisions have been added to the law regarding notices of membership meetings.  These include: 

(a)        A requirement for at least fourteen (14) days notice of a membership meeting, regardless of any inconsistent provisions in the governing documents. 

(b)        A requirement that compliance with this fourteen (14) day notice must be made by an affidavit executed by the person giving the notice, and the affidavit is to be filed among the official records of the Association.  

(c)        At membership meetings (as opposed to board meetings), members and parcel owners have the right to speak with regard to all items opened up for discussion or included on the agenda.  Members must be given the right to speak for at least three minutes on any item, and the Association can require that the member submit a written request to speak prior to the meeting.  Once again, the Association is given the authority to adopt reasonable rules relating to the frequency, duration and other manner of owner participation in membership meetings. 

(d)        In connection with any election disputes between a member and an Association, these disputes are now required to be submitted to mandatory binding arbitration with the Division of Florida Land Sales.  These proceedings are to be conducted in the same manner as condominium arbitrations under Section 718.125(5) and the same procedural rules will apply to the arbitration of election disputes.  In addition to election disputes, recall disputes are also to be handled through binding arbitration with the Division on an expedited basis. 

16.       Alternative Dispute Resolution         

In one of the most significant changes affecting homeowners' associations, Section 720.311 of the Florida Statutes has been amended to provide a requirement that certain disputes between an association and a parcel owner must be filed with the Division for mandatory mediation before any action can be filed in court.  Included in these requirements are: 

(a)        Disputes regarding use of, or changes to, the parcel or the common areas; 

(b)        Other covenant enforcement disputes; 

(c)        Disputes regarding amendments to the condominium documents; 

(d)        Disputes regarding meetings of the board and committees appointed by the board; 

(e)        Disputes relating to membership meetings, other than election meetings; and 

(f)         Disputes relating to access to the official records. 

Mediation proceedings are to be conducted in accordance with the Florida Rules of Civil Procedure.  Mediation is essentially a supervised negotiation session where the mediator has no authority to make a decision, but acts to facilitate discussions and negotiations between the parties, and to help identify options for resolving the dispute, as well as assisting the parties in realistically evaluating the strengths and weaknesses of their position.  Mediation has proven tremendously effective in the court system.  Michael Brudny in our firm has been very involved in alternative dispute resolution and mediation for a number of years. 

It remains to be seen how the requirement for mandatory mediation will work in connection with all the types of disputes identified above.  In condominium law, the selected procedure for alternative dispute resolution was mandatory non-binding arbitration, since many of the cases involved questions of law which may not be subject to effective mediation. Under the condominium model, the arbitrator can order the parties to go to mediation.  A different approach has been used for homeowners' association disputes whereby mediation is required to be conducted, and if mediation is not successful, the parties can then agree to participate in arbitration.  If the parties do not agree to arbitration following an unsuccessful mediation, then either party is free to go to court with the dispute. 

The statute states that the Department of Business and Professional Regulation (presumably through the Division) is required to conduct the mediation proceedings through the use of Department mediators, or otherwise is to refer the disputes to private mediators who have been certified by the Department as provided for in the legislation.  An initial filing fee of $200.00 is established and the parties are required to equally share the costs of mediation unless otherwise agreed by the parties. 

The mediation procedure provided for by this sub-section of the law may also be used by a homeowners' association where membership is not mandatory, or where the Association is not authorized to impose a lien on the property of its members.   

The Department is to develop an educational program to assist homeowners' associations and others in understanding the operation of homeowners' associations and the use of alternative dispute resolution techniques.  This is similar to the educational programs that have been mandated for condominiums. 

As indicated above, this requirement for pre-suit mediation has been made effective immediately, and this appears to have been a major error or oversight in the legislation.  It is our belief that this will cause a great amount of confusion, since it is our understanding that the Department is not expected to be prepared to begin administering these mediations for several months, and this new requirement may result in significant delay.  Mediators have to be certified in accordance with specific criteria set forth in the statute, and all of the details of this new program need to be worked out, in addition to educating all persons involved in homeowners' association disputes about the use and procedures involved in mediation.  It would obviously have been preferable for this portion of the law to have been made effective October 1, 2004, and it is hoped that the legislature has the opportunity to correct this oversight, or that this can otherwise be dealt with administratively. 

17.       Pre-Sale Disclosure 

Disclosure requirements in connection with the re-sale of properties that are subject to restrictive covenants and community associations were previously contained in Section 689.26 of the Florida Statutes.  This Section has been transferred to Chapter 720 and renumbered as Section 720.401.  Also, amendments have been made to the disclosure format and wording which is required.  Many homeowners are not aware of the fact that any contract entered for the sale of property must contain specific wording regarding the disclosure requirements, and if the disclosure summary required by the law, and the wording required to be included within the contract, have not been provided, then the purchaser may void the contract prior to closing, or within three (3) days after receipt of the disclosure summary, whichever occurs first. This right may not be waived by the purchaser.  All communities should prepare a disclosure summary for their community, since the summary requires specific details regarding the amount of the assessments which are currently being imposed.  Each time the assessments are changed, the disclosure form should also be changed, and owners need to be continually advised that this form is available from the Association.  In our opinion, this is a basic service that the Association should consider providing, rather than requiring each homeowner who sells their property to try to prepare the necessary form.  Also, there was an obvious oversight in this portion of legislation since one of the requirements for the disclosure form is a statement that the governing documents can either be obtained from the recording office in the county, or if not recorded, obtained from the developer.  The drafter of this document failed to include a reference to the Association as the proper party to provide the documents rather than the developer, since in most associations the developer entities have long been dissolved.  It is suggested that at the end of this required disclosure, its language should be modified to indicate that the documents can be obtained from the developer or the Association.   

18.       Remedies for False and Misleading Information Provided by Developer 

Section 720.402 has been created to provide remedies to purchasers in homeowners' associations which are similar to those granted to condominium purchasers, where false and misleading statements or information are published by or under the authority of the developer.  These statements can be contained in advertising and promotional materials, contracts, governing documents, or in brochures and newspaper advertising.  This legislation is an excellent addition to the remedies available to homeowners, since developers have sometimes promised to include recreational and other facilities which they never actually built.  There was previously a lack of an established remedy for false and misleading statements.  The law now provides that after someone closes on the purchase of a parcel, the purchaser has a cause of action against the developer for damages from the time of closing until one (1) year after the last of several triggering events.  In no event can the cause of action survive for more than five (5) years from the date of closing.  In any action for relief under this section, the prevailing party is also entitled to recover reasonable attorneys' fees, and this is always an important consideration for persons who are considering legal action.  The law also prevents developers from expending Association funds in the defense of any suit under this new law. 

19.       Jurisdiction of County Courts            

Clarification has been added to Section 34.01 of the Florida Statutes regarding the jurisdiction of county courts to consider disputes involving homeowners' associations.  The law now specifically provides that both county and circuit courts may consider these disputes.  This is a clarification of existing law and practice. 

20.       Community Development Districts   

Included within the new legislation are provisions relating to community development districts (CDD's), which sometimes have interaction with homeowners' associations and community living.  Anyone concerned with the specific provisions of the law in regard to CDD's should consult the changes to Chapter 190 of the Florida Statutes

             A.        Claims Relating to Construction Disputes 

                        House Bill 1899, which is now Chapter 2004-342, Laws of Florida, has substantially amended a law which was adopted last year establishing procedures for asserted defects affecting single family or multi-family homes.  Due to the length of our current legislative Update, we will not go into detail in regard to all of the provisions of the 2004 amendments.  Anyone who is interested can obtain a copy of the above-cited legislation.  However, people should be aware that anyone who wishes to make a claim against any contractor, sub-contractor, supplier, or design professional, must still follow the pre-suit notice provisions and claim provisions contained in this law.  There are detailed provisions regarding the forms of notices and the time frames that must be followed in regard to these claims, and the requirements have now been modified depending upon the size of the community where an Association is representing a number of individual owners. 

CONCLUSION 

            The 2004 legislature adopted numerous changes affecting homeowners' and condominium associations, some of which are already effective and need to be immediately reviewed by any homeowners' associations.  All condominium associations must immediately review their leasing restrictions and determine whether any further restrictions should be proposed or considered before the October 1, 2004 deadline.  There were also many other proposed changes which were not adopted this year, and overall this was one of the most active years in history in regard to community association legislation in Florida.

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            Please remember that the statements contained in this Update are general in nature, and are not to be considered as specific legal advice for any particular Association or situation.  If you have any questions as to how this legislation will affect your Association, or as to any changes in your governing documents or rules which you may wish to consider, please consult your Association attorney. 

            We will continue to attempt to keep you updated on significant changes in the law which may affect your Associations, although we are not able to provide any assurances that each time a significant decision or development occurs, we will be in a position to notify all of our clients.  Associations may wish to consider joining an organization such as Community Associations Institute ("CAI"), which does an excellent job of keeping Associations up-to-date on developments in the law, as well as providing educational and other programs for the benefit of homeowners' and condominium associations and the professionals that are associated with these communities.  

The need for education of board members, and persons dealing with issues relating to condominium and homeowners' associations, is more clear than ever before, due to the expanding and complex laws which govern these communities.  We applaud those associations and directors who take the time to be of service to their communities.  It will be interesting to see how some of the new legislative changes impact condominium and homeowners' associations in the upcoming year, and what additional changes may be proposed or reconsidered next year. 

Best wishes,

______________________________                        ______________________________

Michael J. Brudny                                                         Bennett L. Rabin