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The 2015 Legislative Session – Association Estoppel Certificates – The Devil is in the Details

Florida’s 2015 Legislative Session began on March 3, 2015, and several bills regarding community associations were filed. An already paired set of such bills, House Bill 611 and its companion, Senate Bill 736, are creating great controversy among Florida’s community associations. Both bills propose significant changes to the laws regarding the issuance of estoppel certificates by community associations. To accomplish this, patently drastic and overtly draconian amendments are proposed to section 718.116, section 719.108 and section 720.30851, Florida Statutes, regarding condominium associations, cooperatives and homeowners associations, respectively.

A brief explanation of the term “estoppel certificate” is in order. An estoppel certificate is a certificate issued by a community association (or its manager or attorney), which provides the monies owed to the association as of a particular date, minimally including due and owing assessments, late fees and interest charges, by a current or prior owner. A prospective purchaser may then rely on the estoppel certificate, until its expiration date. Simply put, an estoppel certificate “estops” the association from asserting a greater amount due than what is provided by its estoppel certificate.

House Bill 611 and Senate Bill 736 propose very strict maximum estoppel certificate fees that may be charged. The legislation mandates that the fee for an estoppel cannot, under ordinary circumstances, exceed $100.00, plus $50.00 for a rush and plus another $50.00 if issued by an agent of the association or its attorney. So, these lowered fees will be made up for elsewhere. Likely it will be in higher management and legal fees passed on to the association which are then paid by each member in pro-rata share. No one other than the buyer and seller should share in these costs.

It is comical, in a tragic fashion, just how much attention is being paid to this issue in this year’s legislative session. Realtors typically earn a whopping 6% commission when the property sells. It doesn’t matter how long the property was on the market, the efforts expended by the realtor, or even the ultimate price of the property. Be it a $100,000.00 or $10,000,000.00 sale, the realtor’s commission is customarily 6%. The closing agents earn their fees, the appraiser charges their fees as does the surveyor, the lender and everyone else associated with the sales process. So, in the infinite wisdom of our Florida Legislature, they have decided to make the “association” the bad guy in this process by focusing on the, more often than not, insignificant estoppel fee.

House Bill 611 and Senate Bill 736 will also shorten the amount of time community associations have to respond to requests for estoppel certificates from 15 days to 10 days. If a community association fails to provide an estoppel certificate within the 10 day period, House Bill 611 and Senate Bill 736 provide that the community association will have effectively waived any claim for any amounts due and owing that should have been shown on the estoppel certificate. Furthermore, there is no mechanism provided in the proposed legislation which provides for an extended timeframe within which to respond should the estoppel certificate request be referred to an attorney or in the event an issue arises during the preparation of an estoppel certificate. At times, due to complications that are understood best by those who issue countless estoppel certificates, 15 days is barely sufficient time to issue an estoppel certificate. Under some circumstances, a 10 day window to do so is laughable. Who suffers as a result of the unissued estoppel? Every single member in your association, but for its newest owner, because it is the existing members who have to make up the financial shortfall.

While the amount due as reflected in the estoppel certificate is the maximum amount a community association is allowed to collect, the legislation also provides that it is the maximum amount due from anyone who relies in good faith on the estoppel certificate including successors and assigns. This provision which provides for a chain of never ending assignability is just plain wrong! An estoppel certificate should only inure to the benefit of the requesting party. If someone else wants one, they too should have to pay for it. Otherwise, it is no different than going to the grocery store demanding a free gallon of milk, because your neighbor bought one yesterday.

Additionally, estoppel certificates, under the new laws if made effective, must be effective for thirty (30) days from the date the estoppel certificate is received by the requesting party, which date must be provided on the estoppel certificate. There is no great justification to require the estoppel certificate remain valid for an entire 30 days. Essentially, the inability of the parties to timely close their deal is being held against the association. At times, budgets are amended and special assessments levied. If either is done after the estoppel certificate is issued, then that person may not have to pay their fair share. The longer period of time the estoppel remains valid, the greater the potential harm to the association.

Given the tens of thousands of association members in Florida who can be financially hurt by this legislation, it amazes me how silent this block of voters often remains. If you want good laws benefitting your association then let your legislators know that the terms of this proposed legislation are unacceptable.