REMBAUM'S ASSOCIATION ROUNDUP | The Community Association Legal News You Can Use

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Corporate Transparency Act Compliance and How to File Your Association’s Report

Corporate Transparency Act Compliance and How to File Your Association's Report

The Corporate Transparency Act (“CTA”) was enacted in 2021. The CTA requires that on or before January 1, 2025, all cooperatives, condominiums and homeowner’s associations (collectively, “Associations”) are required to file certain information with the US Treasury department, Financial Crimes Enforcement Network (“FinCEN”). This law requires businesses that are registered with their state’s division of corporations, which includes Community Associations, to provide information on its ‘Beneficial Owners’ which are the decision makers, meaning board members, and officers (and possibly managers, too). Your Association will need to comply with the registration requirements of the CTA or face significant penalties. In addition, any changes to the board members or officers must be reported by updating the information on FinCEN within 30 days of the change.

1) What is the CTA? The CTA aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (“BOI”) Report to the U.S. Department of Treasury’s FinCEN, providing details identifying the decision-making individuals for the Association.

2) What information will each Association have to report? An Association will have to report:

    • Its legal name;
    • Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
    • The current street address of its principal place of business if that address is in the United States (for example, company’s headquarters. The company address must be a U.S. street address and cannot be a P.O. box;
    • Its jurisdiction of formation or registration (State of Organization) and the date of formation;
    • Its Taxpayer Information Number; and
    • Any beneficial owner/board member (the decision maker).

3) Who is considered a beneficial owner of an Association? A beneficial owner of the Association is defined as an individual who either directly or indirectly exercises substantial control over the Association company. The Association will have to provide:

    • The individual’s name;
    • Date of birth;
    • Residential address; and
    • A copy of an acceptable identification document such as a passport or U.S. driver’s license.

Individuals who meet one of the following criteria are considered to exercise substantial control over the Association:

    • the individual is a senior officer;
    • the individual has authority to appoint or remove certain officers or a majority of directors of the Association, such as developers of a developer controlled Association;
    • the individual is an important decision-maker; or
    • the individual has any other form of substantial control over the Association.

4) When should an Association file this report? When should our report be updated?

    • An Association created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
    • An Association created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
    • An Association created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
    • Importantly, there are continuing registration requirements as well. Anytime there is any change in the beneficial ownership it must be reported to FinCin by updating the BOI report within 30 days of the event. This applies to such events as a mid-year replacement board member or officer and possibly after each year’s annual election, too.

5) Are there any penalties associated with not filing or missing the deadlines?

Yes. As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues, plus it is adjusted annually for inflation.

Both individuals and corporate entities can be held liable for willful violations such as a failure to comply with the FinCEN registration requirements. This can also include not only an individual who actually files (or attempts to file) false information with FinCEN, but also anyone who willfully provides the filer with false information to report.

6) Are there third-party service providers to help Associations with filing?

Yes. Associations may use third-party service providers to submit beneficial ownership information reports. Third-party service providers will have the ability to submit the reports via FinCEN’s BOI E-Filing website or an Application Programming Interface (API).

While there are many third-party providers which can be located by doing a simple Google search, at this time we cannot recommend one company over another. Therefore, we are merely sharing the following information which we discovered through our own Google search. Four companies assisting with the CTA filings include:

There are others, too.

We understand that some management companies may also offer this service for an additional fee. Whether to consider using your current management company or a qualified third-party provider is a Board business decision.

Please note that Kaye Bender Rembaum, P.L., will not be performing any FinCen registrations.

7) Can an Association file on its own, without the use of a third-party?

Yes, an Association may file on its own electronically through a secure filing system via FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov). There is no fee for submitting your BOI to FinCEN. An Association can access the form by going to FinCEN’s BOI E-Filing website (https://boiefiling.fincen.gov) and select “File BOIR.”

However, due to the potential liability exposure to the Association and possibly individuals, we do not recommend that an Association undertake compliance with this act by filing on their own.

8) Are there any efforts undertaken to exempt community associations from the registration requirements?

In July, 2024, the Community Associations Institute (CAI) Board of Trustees approved filing a lawsuit to exempt and protect community associations from burdensome requirements outlined in the Corporate Transparency Act. On October 11, 2024 there was a hearing on CAI’s request for a preliminary injunction against the U.S. Department of Treasury to try and exempt Community Associations from the burdensome reporting requirements of the CTA. A ruling is expected in the next few weeks, but not guaranteed. As such, for now, compliance with the CTA by January 1, 2025 remains required.

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2024 Legislative Clarifications for Board Members and Managers – An Update

2024 Legislative Clarifications For Board Members and Managers

The purpose of this article is to address the following:

    • Homeowners’ and condominium association board member certification requirements, certificate retention and continuing education requirements (all of which are quite different);
    • Condominium association and homeowners’ association hurricane protection requirements;
    • Clarify homeowners’ association website posting requirements and remind homeowners’ association board members of mandates from the 2024 legislation.

Chapter 718, F.S.: CONDOMINIUM ASSOCIATION BOARD MEMBER CERTIFICATION REQUIREMENTS, CERTIFICATE RETENTION AND CONTINUING EDUCATION REQUIREMENTS:

    • Each newly elected or appointed board member must submit to the secretary of the association the: (i) written certification AND (ii) educational certificate within 1 year before being elected or appointed or 90 days after the date of election or appointment.
    • Specifically, for the (i) written certification, all residential condominium board members must certify, in writing to the secretary of the association, that he or she has read the association’s declaration of condominium, articles of incorporation, bylaws, and current written policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members.
    • For the (ii) educational certificate, condominium association board members must complete an educational curriculum that has been approved by the DBPR that is at least four hours long with certain mandated subjects.
    • A director of an association of a residential condominium who was elected or appointed before July 1, 2024, must comply with both written certification AND educational certificate requirements by June 30, 2025.
    • To reiterate, a director of an association of a residential condominium who was elected or appointed after July 1, 2024, must comply with both the written certification AND educational certificate requirement within 90 days after being elected or appointed to the board.
    • The written certification and/or educational certificate is valid for seven years after the date of issuance and does not have to be resubmitted as long as the director serves on the board without interruption during the seven-year period.
    • Continuing Education: In addition to the (i) written certification and (ii) educational certificate discussed above, one year after submission of the most recent written certification and educational certificate, and annually thereafter, a board member of an association of a residential condominium must submit to the secretary of the association a certificate of having satisfactorily completed at least one hour of continuing education administered by the division, or a division-approved condominium education provider, relating to any recent changes to this chapter and the related administrative rules during the past year.
    • Condominium association board members elected or appointed before July 1, 2024, have until June 30, 2025, to meet the new education curriculum requirement consisting of 1 hour of continuing education per year.
    • The condominium association must retain a director’s written certification and/or educational certificate for inspection by the members for seven years after a director’s election or the duration of the director’s uninterrupted tenure, whichever is longer.
    • Any director who fails to timely comply with the foregoing written certification and educational certificate requirements is suspended from service on the board until he or she complies.

Chapter 720, F.S.: HOMEOWNERS’ ASSOCIATION BOARD MEMBER CERTIFICATION REQUIREMENTS, CERTIFICATE RETENTION AND CONTINUING EDUCATION REQUIREMENTS:

    • Homeowners’ association board members elected or appointed to the board on or after July 1, 2024, must take a board certification course within 90-days after being elected or appointed to the board (no minimum time required, typically around two hours).
    • In addition, homeowners’ association board members must complete the education specific to newly elected or appointed directors at least every four years.
    • The DBPR approved educational curriculum specific to newly elected or appointed directors must include training relating to financial literacy and transparency, recordkeeping, levying of fines, and notice and meeting requirements.
    • In addition to the education course specific to newly elected or appointed board members, Homeowners’ association board members with fewer than 2,500 parcels in the association must take four hours of continuing education annually and if 2,500 parcels or more in the association, then eight hours of continuing education annually.
    • The homeowners’ association must retain each director’s written certification or educational certificate for inspection by the members for five years after the director’s election.
    • The ability of a recently elected or appointed homeowners’ association board member to simply submit a written certificate certifying that they read the association’s declaration of covenants, articles of incorporation, bylaws, and current written rules and policies; that he, or she, will work to uphold such documents and policies to the best of his or her ability; and that he, or she, will faithfully discharge his or her fiduciary duties to the association, is no longer an option to meet certification requirements as it has been removed from Section 720.3033, Florida Statutes.

HURRICANE PROTECTION REQUIREMENTS:

    • Chapter 718, F.S.: Condominium Association Hurricane Protection Specifications. Each board of a residential condominium or mixed used condominium must adopt hurricane protection specifications for each building within the condominium operated by the association which may include color, style, and other factors deemed relevant by the board (please note that this provision used to apply to hurricane shutters but now applies to all hurricane protection).
    • Chapter 720, F.S.: Homeowners’ Association Hurricane Protection Specifications. The board or any architectural, construction improvement, or other similar committee of an association must adopt hurricane protection specifications for each structure or other improvement on a parcel governed by the association. The specifications may include the color and style of hurricane protection products and any other factor deemed relevant by the board. All specifications adopted by the board must comply with the applicable building code.

Chapter 720, F.S.: HOMEOWNERS’ ASSOCIATIONS NEW WEBSITE / APP POSTING REQUIREMENTS FOR THOSE HOA’S REQUIRED TO HAVE A WEBSITE / APP:

HOA New Website: By January 1, 2025, an association with 100 or more parcels shall post several documents within its Official Records on its website or make available such documents through an application that can be downloaded on a mobile device.

    • HOA New Website Posting Requirement for Members’ Meetings– Notice of any scheduled meeting of the members and the agenda for the meeting, as required by Section 720.306, Florida Statutes, at least 14 days before such meeting. The notice must be posted in plain view on the homepage of the website or app, or on a separate subpage of the website or app labeled “Notices” which is conspicuously visible and linked from the homepage. The association shall also post on its website or app, any document to be considered and voted on by the members during the meeting, or any document listed on the meeting agenda, at least seven days before the meeting at which such document or information within the document will be considered.
    • HOA New Website Posting Requirement for Board Meetings– Notice of any board meeting, the agenda, and any other document required for such meeting must be posted on the website or app no later than the date required for such notice.

REMEMBER, EVERY HOMEOWNERS’ ASSOCIATION BOARD MUST DO THE FOLLOWING:

    • Adopt hurricane protection standards/rules as discussed above.
    • Provide copies of the rules and covenants to every association member before October 1, 2024, or post same on the association’s website and send notice to each member at their address used for official notices as to where they can locate them.
    • Adopt rules and regulations governing official record retention.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the September 2024 edition of the “Florida Community Association Journal“.)

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Since When Should the HOA Clubhouse Not Come With Your Home Purchase?

Since When Should the HOA Clubhouse Not Come With Your Home Purchase?

The Florida Legislature Is Called Upon To Act To Put A Stop To Developers Who Require HOA Members To Purchase Their Community Clubhouse And/Or Clubhouse Operations After Turnover

Building property subject to a homeowners’ association (HOA) should not entitle a developer to be in a position to financially gouge the association’s members month after month by using the assessment regime to continually line its pockets. Essentially, that is what association member Gundel argued in court against his association’s developer, Avatar Properties, who built out the Solivita Homeowners’ Association. In this HOA the club facilities, including a spa and fitness center, dining venues, indoor and outdoor pools, parks, tennis courts, and more, were not subjected to the declaration, but rather remained under the exclusive ownership and control of Avatar, the developer, and therefore were not a part of the common areas. This means that as a part of the turnover process, the developer was not required to turn over the club facilities and operations to the now member-controlled HOA but rather retained ownership and control of those facilities. Can you imagine paying hundreds of thousands of dollars for a beautiful new home in a gorgeous community, which includes access to a sprawling clubhouse with dining rooms, spas, and all of the amenities and yet, even though those club amenities are in the middle of the community, they are  owned by a corporation not subject to Chapter 720, Florida Statutes, in any fashion, with the intent being that such club amenities will never be under the control of the HOA’s members?

In the case, Avatar Properties Inc. v. Gundel, Case no. 6D23-170, decided June 22, 2023, by Florida’s Sixth District Court of Appeal, the Court (which, in our opinion, was the correct decision) explained that within the Solivita Declaration, the developer included language for each association member to pay as a part of the annual assessment a sum of money unilaterally determined by the club operator for both club operations and what also was just pure profit as argued by owner Gundel.

The Court explained that the assessment imposed by Avatar (the developer) for the mandatory club membership had two components. One component was the amount required for club expenses to be shared proportionately by each resident. The second component was for a membership fee that represented, according to the Court, an annual profit charge to each owner that was due and payable to Avatar. In fact, if a member did not pay, then their home could even be subject to the lien and foreclosure process by the association.

In the trial court’s summary judgment hearing, the Court ruled in Gundel’s favor, finding that assessments for the club, which constituted profit, were improper because pursuant to Section 720.308 of the Florida Statutes, assessments cannot be levied for profits, but only for expenses.

In response to this case and possibly for other reasons, at least one developer designed a new HOA community with a big difference: it made the clubhouse building and the dirt upon which it was constructed to be a part of the common areas of the HOA. Then through a complicated process laid out in the declaration, the developer provided that the clubhouse operations were not owned by the HOA and that after turnover of control of the HOA to the members, the members must purchase the “operations” of the club at what many consider a grossly inflated price. Should the association members decide not to make the purchase, then the developer maintains the right to sell the club operations to a third party for which the assessment paying members will be at the financial mercy of the club operator forever. No doubt the association membership is already paying for the clubhouse operations through their monthly assessments, and in our opinion to now require the membership to spend millions of dollars to buy those clubhouse operations is just plain wrong!

Let’s break this alternate scheme down. Although previously disclosed in the declaration and its attached club plan, either i) the association membership agrees to purchase the club operations at an inflated price for millions of dollars (and for what—the right to operate their own clubhouse?);  or (ii)  the developer retains the right to sell the club operations to a third party who will then be entitled to charge members assessments to both fund the operations and, like any business, earn a profit for doing what should have been handed over to the membership as a part of the turnover process. After all, what clubhouse operator is going to operate at cost and not expect a profit? Either way, the members lose, lose, and lose.

This type of plan ultimately hurts owners as it will likely create a five figure per member assessment obligation either in the nature of paying back the loan necessary to purchase the clubhouse operations or to be forced to pay a new clubhouse operator. The only money a post-turnover association member should have to pay for their clubhouse operations is the actual money expended for operations (i.e., what it costs to provide the restaurant, spa and pool services, etc.). Common area facilities were never designed or even contemplated to be a continual profit center for a developer or developer-related entity.

Worse still, it appears that these types of schemes have no room for negotiation. The purchase price has been pre-determined by the developer years ago when it initially recorded the community’s governing documents. While the developer can argue it is all disclosed in the governing documents (and therefore proposed buyers/future members have notice of this issue), it takes a fairly sophisticated legal mind to understand how this process is going to work. In this author’s experience, the financial obligations associated with either having to buy the clubhouse and/or the clubhouse operations is often quite a surprise to the members.

In short, requiring the membership to purchase the clubhouse operations based on an unreasonable financial formula requires that the association borrow the millions of dollars necessary to pay the developer. In the end the obligation to pay the loan will be wrapped up in the assessment regime which means, once again just like in the Avatar case, the developer is improperly requiring the association to levy assessments for the developer’s (or third-party club operator’s) gross profit rather than only the legitimate expenses as contemplated by Section 720.308 of the Florida Statutes.

In our opinion, it is evident the Florida legislature needs to protect the citizens of the State of Florida by declaring such schemes unlawful. Clearly, the clubhouse operations should be turned over to the association membership as part of the turnover process, and the membership should not be charged for that which they should already own. If it is the clubhouse structure issue which needs to be purchased because it was not included in the overall purchase price of the houses within the community, then certainly the developer is entitled to recoup its legitimate expenses associated with the buildout; but post turnover the developer should not be entitled to profit at the expense of the association membership. If the developer wants to profit from the clubhouse in the clubhouse operations, then certainly the developer could have included those sums within the purchase price of each member’s home. Their decision not to do so and to artificially deflate the price of a home as a result thereof should not be allowed.

One cannot help but wonder if these types of clubhouse schemes could rise to the level of violating Florida’s Deceptive Trade and Practices Act as set out in Chapter 501, Fla. Stat. In fact section 501.24, Fla. Stat., provides in relevant part that unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful. While the developer can argue that the clubhouse scheme is fully disclosed, it is our opinion the owners can certainly argue that this practice is, at best,  unfair and at worst unconscionable.

Board members and members who live in an association with these types of obligations are strongly urged to discuss their options with competent legal counsel so as to make informed decisions whether to buy the clubhouse and/or the clubhouse operations or consider filing a lawsuit against the association’s developer, arguing as Gundel did in the Avatar case, that this type of profit making activity is unlawful. Also, it must be noted that while the Sixth District Court of Appeal fully agreed with the outcome of the trial court, it certified a question to the Florida Supreme Court regarding the matter. However, the Florida Supreme Court declined review. Therefore, it appears the Gundel opinion remains valid. Nevertheless, it does not go far enough to protect association members from having to purchase their clubhouse and/or clubhouse operations after turnover. Therefore, the Florida legislature needs to do its job and protect the citizens of the state by outlawing this process altogether and requiring an HOA developer to turn over the HOA clubhouse and all of its operations to the association as a part of turnover process.

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2024 Legal Update: Interim Clarifications & Corrections for HOA & Condominium Board Members & Managers

2024 LEGAL UPDATE: INTERIM CLARIFICATIONS & CORRECTIONS FOR HOA & CONDOMINIUM BOARD MEMBERS & MANAGERS

Download our latest 2024 Legal Update today (Dated 8.7.2024) – Click HERE to download

The purpose of this interim short article is to clarify:

i) homeowners’ association versus condominium association board member certification and continuing education requirements;

ii) provide greater clarity regarding condominium association hurricane protection requirements;

iii) clarify homeowners’ association website posting requirements, and remind homeowners’ association board members of three mandates from the 2024 legislation.

Board Member Certification Requirements and Continuing Education Requirements.

Condominium association board members must take a 4-hour board member certification course with certain subjects mandated within 90-days after being elected or appointed to the board.

Condominium association board members must take one-hour of continuing education per year.

Homeowners’ association board members must take a board certification course within 90-days after being elected or appointed to the board (no minimum time required, typically two hours).

Homeowners’ association board members with fewer than 2,500 parcels in the association must take 4-hours of continuing education per year and if 2,500 parcels or more in the association, then 8-hours of continuing education per year.

At the present time, no clarification has been provided whether the board certification courses will count towards the continuing education requirements.

With regard to condominium association hurricane protection requirements, in our last version of the 2024 Legal Update, there was a typo on page 32 where the word “irrelevant” was erroneously used instead of “relevant”.

Condominium Hurricane Protection Specifications. Each board of a residential condominium or mixed used condominium must adopt hurricane protection specifications for each building within the condominium operated by the association which may include color, style, and other factors deemed relevant by the board (please note that this provision used to apply to hurricane shutters but now applies to hurricane protection).

The following two homeowners’ association meeting notice requirements are applicable only to postings on the HOA website (or App), and not the physical posting at a conspicuous place in the community:

HOA: New Website Posting Requirement for Members’ Meetings.
Notice of any scheduled meeting of the members and the agenda for the meeting, as required by Section 720.306, Florida Statutes, at least fourteen (14) days before such meeting. The notice must be posted in plain view on the homepage of the website or app, or on a separate subpage of the website or application labeled “Notices” which is conspicuously visible and linked from the homepage. The Association shall also post on its website or application, any document to be considered and voted on by the members during the meeting, or any document listed on the meeting agenda, at least seven (7) days before the meeting at which such document or information within the document will be considered.

HOA: New Website Posting Requirement for Board Meetings.
Notice of any board meeting, the agenda, and any other document required for such meeting must be posted on the website or app no later than the date required for such notice.

Remember, every homeowners’ association board must:

    1. Adopt hurricane protection standards/rules.
    2. Provide copies of the rules and covenants to every association member before October 1, 2024 or, post same on the association’s website and send notice to each member at their address used for official notices as to where they can find it, etc.
    3. Adopt rules governing official record retention.
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The Complete 2024 Legislative Guide Affecting Florida’s Community Associations

The Complete 2024 Legislation Guide Affecting Florida's Community Associations

Now available for Download. Click HERE TO DOWNLOAD.

The 2024 legislative bills affecting Florida’s community associations are in play and if not already signed into law, are expected to become law; The Bills at issue are:

    • HB 1203, affects homeowners’ associations (signed by the governor and effective July 1, 2024)
    • HB 59, affects homeowners’ associations (signed by the governor and effective as of July 1, 2024)
    • HB 293, affects homeowners’ associations (signed by the governor and effective immediately)
    • HB 1029, affects condominium associations (signed by the governor and effective as of July 1, 2024)
    • HB 1021, affects condominium associations (expected to become law, effective July, 1, 2024, but as of writing this article, not signed by the governor).
    • SB 382, affects managers CEU requirements (signed by the governor and effective as of July 1, 2024)
    • And of course, no 2024 Legislative Guide would be complete without a discussion regarding the Federal Corporate Transparency Act requirements, which we also include.

Anyone who would like a copy of our complete 2024 Legislative Guide can download it by clicking HERE.

The following information is not intended to replace our 2024 Legislative Guide but rather is intended to address only a few of the more interesting upcoming changes.

HB 1203 (affecting HOAs) and HB 1021 (affecting condominiums) both provide for new community association manager requirements as amended in Chapter 468, Florida Statutes, including such items as posting of the manager’s duties and available hours of the manager, along with a plethora of new financial interest disclosures which if not strictly adhered to can lead to possible cancellation of the management contract. In the outline provided on our website as referred to above, all of these new requirements are together in one place (which, in our view, is how the legislature should have presented these new requirements).

A few of the new provisions affecting homeowners’ associations, follow:

    • An HOA with 100 or more parcels must have a website, and the new law provides for which documents must be posted on that website
    • Membership meeting posting requirements now include the necessity that any document to be considered by the members by way of a vote must also be posted
    • The HOA must adopt written rules governing the method by which official records are to be retained and periods that such records must be retained. The law clarifies that most official records must be retained for at least seven years
    • Owners have the right to request a financial accounting, which must be provided within 15 business days of the written request, and failure to provide it can lead to the extinguishment of a fine
    • It appears all board members must be certified by taking a four-hour class, and such certifications remain valid for only four years. In addition, if there are fewer than 2500 parcels, then the HOA board members must complete four hours of continuing education annually, and if greater than 2500 parcels the HOA board members must complete eight hours of continuing education annually
    • New criminal penalties are associated with forging of a ballot envelope or voting certificate along with refusal to allow inspection or copying of official records in furtherance of any crime
    • Before October 1, 2024, all HOAs must provide a physical or digital copy of the association’s covenants and rules to every member of the association
    • All HOAs must adopt hurricane protection specifications for each structure or other improvement on a parcel governed by the association.

Regarding whether the following legislative changes will apply to existing HOAs will have to be determined later, but suffice it to say, it is this author’s opinion that new laws affecting existing substantive contract rights cannot be applied retroactively, absent Kaufman language in the declaration) because to do so impairs such existing substantive contract rights. in other words, there are constitutional protections against governmental impairment in existing contracts. Therefore, absent clear intent expressed within a governing document for changes in the law to be effective against various covenants, it is unlikely that this type of legislation can be applied retrospectively, but only time will tell.

    • The HOA, including its architectural committees, may not enforce or adopt a covenant rule or guideline that limits or places requirements on the interior of a structure that is not visible from the parcel’s frontage or adjacent parcel or adjacent common area or community golf course
    • Similarly, the HOA cannot require a review and approval of plans regarding central air conditioning, refrigeration, heating, or a ventilating system if such a system is not visible from the parcel’s frontage, an adjacent parcel, an adjacent common area, or community golf course and is similar to a system that is approved or recommended by the association
    • Regardless of any covenant restriction, bylaw, or rule, the HOA may not restrict parcel owners from installing, displaying, or storing any items on a parcel which are not visible from the parcel’s frontage, adjacent parcel, adjacent common area, or community golf course including but not limited to artificial turf, boats, flags, vegetable gardens, clothes lines, and recreational vehicles
    • Pickup trucks cannot be prohibited from being parked in the owner’s driveway or any other area where the owner or their guest or invitee has the right to park
    • Work vehicles regardless of any insignia or visible designation on the vehicle cannot be prohibited from being parked anywhere the owner, guest, or invitee may park, so long as it is not a “commercial motor vehicle” as defined in the Florida Statutes
    • Contractors may not be prohibited from entering the community solely because the contractor is not on a preferred vendor list
    • Homeowners’ association documents may not preclude a property owner from hiring a contractor solely because the contractor does not have a professional or occupational license
    • The HOA may not require a contractor or worker to present an occupational license to be allowed entry into the HOA.

As to condominium associations, and already passed into law:

    • The “My Safe Florida Condominium Pilot Program” is created in Chapter 215, Florida Statutes, and provides procedures to apply for inspections and grants for certain mitigation projects. There are requirements for both board and membership approval to apply for the grants. The DBPR must promulgate grant forms and such prior to the program being in a position to provide any funding. Grants must be matched on the basis of one dollar provided by the association for every two dollars provided by the state. The association may receive grant funds for both roof-related and opening protection-related projects, but the maximum total grant award may not exceed $175,000 per association. Once the money allocated to the grant program, which we understand is a total of $30 million, runs out, the money is gone. This means that if each condominium association receives the maximum amount, only 171 condominium associations will benefit.

If passed into law, here are a few of the new laws affecting condominium associations:

    • Board members must be certified by taking a board certification class that is at least four hours long and provides instruction on a variety of required subjects. The certification is valid for seven years so long as a board member serves without interruption. Each condominium association board member is required to take one hour of continuing education per year. Board members elected or appointed before July 1, 2024, must comply with the new written certification and educational certificate requirements by June 30, 2025
    • An additional exception from the milestone requirements is provided for family dwellings with three or fewer habitable stories above ground
    • Official records must be maintained in an organized manner that facilitates inspections of the records by a unit owner
    • The association may fulfill its obligations by providing official records to requesting members by directing such a member to the association website
    • In response to an official records request, a checklist of all records made available must be provided to the requesting member as well as identification of those records which were not made available
    • When posting a board meeting agenda, if there is an item relating to the approval of a contract for goods or services, then a copy of the contract must be provided with the meeting notice
    • A residential condominium with more than 10 units must have a board meeting at least once each quarter where the agenda includes an opportunity for members to ask questions of the board. Such right of the members includes the right to ask questions related to reports on the status of construction or repair projects, status of revenues and expenditures, and other issues affecting the condominium
    • At least 90 days before an election, any member whose voting rights are going to be suspended must be provided notice that their voting rates are going to be suspended due to nonpayment of a fee or other monetary obligation
    • The term “hurricane shutter” in Chapter 718 is now replaced with the term “hurricane protection.” All condominium associations are required to adopt hurricane protection specifications
    • The Statute of Repose (i.e., the absolute last date a builder/construction professional can be sued) now begins to run at the turnover of the association from the developer to the unit owners rather than from the date of the temporary certificate of occupancy. This is an extremely important change to protect the rights of the unit owners to be able to bring construction defects lawsuits when necessary under the circumstances
    • It is unlawful for the association to engage in retaliatory conduct against a unit owner who, in good faith, complained to a governmental agency, filed a complaint against the association, alleged violations of chapter 718, or made public statements critical of the operation or management of the association, etc. This is an expansion of the prohibition against “SLAPP” lawsuits (i.e., “strategic lawsuits against public participation”).

As you have already read, this year’s proposed legislation is extensive. For a more detailed analysis please CLICK HERE to download your comprehensive digest of these new laws.

While I would prefer each reader download his/her/their own version, nevertheless you are most welcome to download the 2024 Legislative Guide and share it with your fellow board members, managers, and community members so long as our cover page and all material remain intact. If you would like to reprint the 2024 Legislative Guide in your own email blast, please contact me for permission at:
[email protected].

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the “Florida Community Association Journal“.)

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Why Is This Special Assessment Different From All Others and the Need for a Legislative Fix

Why Is This Special Assessment Different from All Others and the Need for a Legislative Fix

Not too long ago a condominium association foreclosed its assessment lien against a deceased unit owner and the sole heir. With the statutory prerequisites completed, including the recordation of the lien, the association commenced its foreclosure lawsuit. Ultimately, due to the failure of the defendants to respond, a final summary judgment in favor of the association was ordered, This judgment also included two special assessments that were properly levied by the association and remained unpaid. Here is where things begin to get interesting.

The special assessments were levied by the association after the lien was recorded and after the association commenced its foreclosure lawsuit. Therefore, the special assessments were not specifically referenced in the lien or in the foreclosure complaint because they were adopted after the lien was recorded and after the foreclosure action commenced. It is important to note that Section 718.116 (5)(b), Fla. Stat., provides the following, in pertinent part:

…The claim of lien secures all unpaid assessments that are due and that may accrue after the claim of lien is recorded and through the entry of a final judgment, as well as interest, administrative late fees, and all reasonable costs and attorney fees incurred by the association incident to the collection process…(emphasis added)

Therefore, one might logically conclude that the special assessments, even though adopted after the claim of lien was recorded, were properly included in the final summary judgment. However, ultimately, the heir appealed the final summary judgment which had included the two special assessments, arguing that it was improper for the trial court to have included such amounts in the final judgment. In its decision in Orfanos v. 45 Ocean Condominium Association, Inc. 368 So.3d 995 (4th DCA, August, 2023), the 4th DCA concluded that a special assessment that was adopted after all of the pleadings were filed could not be included because they are not the “assessments that accrued” under the above-referenced statutory provision. The appellate court concluded that their decision was supported by a prior 4th DCA decision in Losner v. Australian of Palm Beach Condominium Ass’n, 139 So. 3d 986 (Fla. 4th DCA 2014). (Probably not coincidentally, two of the judges on the Losner appellate panel were also on the Orfanos appellate panel.) It was the Losner decision that provided the following:

…However, the word “accrue” references assessment already made before a claim of lien is filed, but coming due afterwards, but it does not refer to additional assessments for other purposes, such as separate assessments that are assessed against an owner after the time the complaint to foreclose on a claim of lien is filed…

In Orfanos the appellate court held that in order for the special assessments to have been included in the final summary judgment, the association should have either amended its complaint and/or the lien.

While this author and many experienced association lawyers may disagree, that is of little consequence, as the appellate court has spoken. To resolve these problems, a change to 718.116(5)(b) should be considered. Suggested proposed language could read as follows:

…The claim of lien secures all unpaid assessments, including, but not limited to special assessments, that are due and that may accrue and/or be adopted after the claim of lien is recorded and through the entry of a final judgment, as well as interest, administrative late fees, and all reasonable costs and attorney fees incurred by the association incident to the collection process…

Failure of the Florida legislature to pass such legislation, and similar legislation as may be needed for homeowner and cooperative associations, not only leads to waste of judicial economy due to the need for additional legal proceedings but also leads to unnecessary expenditure on association legal fees. Under current legislations the association will need to either amend the existing complaint and/or lien, thereby causing additional pleading and hearings, or require a whole new collection action to be filed beginning with the statutory required collection letters.

Therefore, without a legislative fix, additional court hearings will likely be necessary, causing the association to incur additional legal fees. The association will ultimately force the debtor to pay for those additional fees if the association successfully concludes its collection/foreclosure action. All of this could be avoided by the Florida legislature undertaking the simple fix suggested above.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the May 2024 edition of the “Florida Community Association Journal“.)

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Dos and Don’ts of Election Challenges

Dos and Don'ts of Election Challenges in Community Associations

Pursuant to their relevant statutory provisions, election disputes that take place in condominium, homeowners’, and cooperative associations are subject to mandatory nonbinding arbitration before the Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division,” for short). It is referred to as “nonbinding” because the arbitrator’s order is not final until 30 days after its issuance, which provides time for either party in the dispute to challenge the decision to their local circuit court, which hears the case de novo (anew).

As you will read, not every election dispute will be heard by the Division. As a threshold matter of importance, the Division will not hear election disputes within 60 days prior to an election or 60 days after the election has taken place. In order to bring an election challenge, Florida Statutes require prior written notice to the other party of the dispute, where a reasonable opportunity to correct the alleged error is provided, and it is clearly expressed that if the alleged error is not cured, an arbitration action will take place. In a prior arbitration case, it was held that providing only 10 days to cure the alleged defect in a pre-arbitration notice was insufficient. Therefore, it is suggested to provide more than 10 days opportunity to cure the alleged election defect prior to filing an action for arbitration.

Interestingly, the general rule is that to have standing to challenge election results, arbitration action must be brought by a candidate or an individual who was prevented from being a candidate.  The Division has even held that a member who was not a candidate did not have standing to challenge the election results that other persons should have been declared the winning candidates. While these arbitration decisions are not binding precedent, they are instructive and, if nothing else, useful in evaluating the best course of action.

In the context of condominium election challenges, there are three flaws that are typically “fatal” to the association, if committed. They are i) a substantive or serious defect in the first notice of election, ii) the failure to include a timely submitted candidate information sheet in the second notice of election, and iii) failure to include the name of each eligible candidate on the election ballot. While each of these can potentially be timely cured in advance of the election, if not, then they likely lead to a successful election challenge.

For example, failing to mail the notice of election to one or more owners or the failure of the first or second notice of election to accurately state the street address of the meeting have been considered as “fatal” flaws. Also, the failure to include a timely submitted candidate information sheet or failure to include the name of a candidate on the ballot have also been considered as  “fatal” flaws. However, so long as the election is re-noticed from the second notice of election, including all of the candidate and information sheets and/or also including the name of all of the candidates on the ballot, then such fatal flaws can be cured in advance of the election. In these instances there would be no further solicitation of candidates, but rather a rescheduling of the night of the election itself by sending a revised and corrected second notice of election at least 14 days prior to the election which would cure that defect. This amended second notice should clearly state the reason(s) for having to send the corrected notice.

It is important to note that while condominium association elections are strictly construed in accordance with relevant Florida Statutes, homeowners’ association elections occur in accordance with their governing documents. Therefore, whether the above fatal flaws have applicability to a homeowners’ association fully depends upon the style of election set out within the governing documents.

Arbitrators with the Division have held that a new election will have to be scheduled if  in the governing documents there is included a requirement that candidates be full-time residents of the state of Florida or even reside in their unit full time and such requirements were enforced during the election. Therefore, there cannot be a residency requirement of any kind for board members. Similarly, arbitrators have held that associations cannot require candidates to complete a criminal background check or even execute an acknowledgment that they are not a felon.

Contrary to popular belief, the relevant Florida Statutes do not require candidates to be members of a community association in order to run for the board of directors (often, “membership” is defined in the governing documents as being an owner of a parcel within the community). However, such requirements can be set out in the governing documents; but if such a requirement is not in the governing documents, then the board cannot disqualify a potential candidate because he or she is not an owner or member. This means that without such requirements specifically set forth in the governing documents of the association, any non-member, including tenants and occupants, are qualified to run for the board of directors. Therefore, if you desire to avoid such a circumstance, you should consult with legal counsel for your association regarding whether such requirements exist in the governing documents; if not, then you should consider preparing an amendment for the community to approve to ensure that only members who are actual members/owners of the association are qualified to run and serve on the board.

As to the first notice of election, notwithstanding any strict requirements set out in the first notice of election regarding where potential candidates must submit their notice of candidacy, it is not sufficient to exclude a candidate on the basis of the candidate  delivering his or her intent to be a candidate elsewhere so long as it is reasonable to conclude the association actually received notice of such candidate’s intent to run for the board. For example, a specific address could be required to mail the intent to run form, but the fact that a candidate hand-delivered such notice to a board member or manager would likely not be sufficient grounds to exclude the candidate.

Through a variety of arbitration decisions, the arbitrators have made clear that if the violation at hand would not have changed the results of the election, then the challenge will fail. For example, an association that improperly excluded several ballots due to perceived flaws with the outer envelope, which in fact were later held not to be flaws at all and which if counted would not have overturned the otherwise valid election results if the ballots were later included in the total count, would not have changed the result.

In other instances where numerous violations combine to clearly affect the reliability of the election results, then an election challenge may be valid. For example, where unit owners are permitted to cast ballots without inner envelopes, at least one owner was permitted to retrieve his ballot and change it, and nobody verified signatures on the outer ballot envelopes and where at least one unit owner was allowed to cast a ballot after the polls had already closed, then cumulatively the election results were determined to be  no longer reliable and a new election was required.

While the Division has promulgated condominium election rules in the Florida Administrative Code, it has not yet done so for homeowners’ associations. Therefore, the body of condominium arbitration decisions can provide some guidance; but for the most part, when examining homeowners’ association election challenges, the arbitrators are required to consider the significance and totality of violations in their decision-making as to whether to void an election, or not.

At times, for reasons that really do not make any practical sense, some management companies when preparing a homeowners’ association election revert back to the condominium form of election with a first notice, second notice, intent to run, etc. rather than relying on the homeowners’ association governing documents, which have a completely different election style and where voting is by proxy or in person. Also, there are no requirements to declare candidacy in advance of the annual election, meaning a candidate could actually nominate himself or herself from the floor of the meeting on the election day itself. When management companies go on autopilot and use the condominium style of election contrary to the requirements set out in the homeowners’ association governing documents, then the arbitrators will likely require a new election to take place in conformity with the governing documents of the homeowners’ association.

A successful challenge of a homeowners’ association election often rests upon whether the alleged violation affected the outcome of the election. This once again is evidence that unless the alleged violation would have changed the outcome of the election, then the election challenge likely fails even if there were serious irregularities during the election process.

A few odds and ends are worthy of discussion as well. An active board of directors should not use the association’s pulpit for campaigning. Doing so can lead to a successful election challenge. However, an existing board member can certainly campaign on his or her own time and using their own means but not through the association or its website. If the association has not enforced use of voting certificates, then to do so without providing advanced written notice and an opportunity for the owners to comply could invalidate election results. Finally, if a valid election does not occur because either a quorum was not achieved or in the condominium context at least 20 percent of the eligible voters did not cast the ballot, then there is no obligation of the association to try again.

When bringing an election challenge is under consideration, ask yourself if the irregularity would have brought about a change in the outcome of the election. If not, then, think twice about bringing the challenge. In any event, it is worthwhile for an association concerned with its election process to consult with the association’s lawyer for a detailed conversation as to how best to avoid such problems in the future.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the March 2024 edition of the “Florida Community Association Journal“.)

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**Revised** | Corporate Transparency Act Found Unconstitutional

THE CORPORATE TRANSPARENCY ACT FOUND UNCONSTITUTIONAL

In the case titled, National Small Business United, d/b/a the National Small Business Association, et al v. Janet Yellen, in her official capacity as Secretary of the Treasury, et al., Case No. 5:22-cv-1448-LCB, United States District Court, Northern District of Alabama, Northeastern Division entered on March 1, 2024, the court found the CTA to be unconstitutional but, at least for the time being, for the Plaintiffs, only.

By way of background, in 2021, Congress passed the 1500-page National Defense Authorization Act (the “NDAA”) and included within it, the 21-page Corporate Transparency Act (the “CTA”). In brief, the CTA would have required just about every entity registered with the Secretary of State, in each state, which includes community associations, to provide certain information about its “beneficial owners.” In the case of community associations, the beneficial owners are the board members and officers (and possibly managers, too) would need to include the name, date of birth, current address, and an identification number from a driver’s license, state ID card, or passport, and a copy of such document. The purpose of the CTA was aimed to prevent financial crimes, money laundering, tax evasion, and even the funding of terrorism. While there are limited exemptions, community associations were not included in these exemptions, notwithstanding lobbying efforts of the Community Association Institute lobbyists. Failure to comply with the CTA can lead to expensive civil financial penalties and significant time in federal prison.

In finding the CTA unconstitutional, the Northern District of the Northeastern Division Alabama appellate court noted that “Congress sometimes enacts smart laws that violate the [United States] Constitution…this court’s job is to consider whether the CTA follows the [United States] Constitution, not whether it is good policy.” The wise court asks, “does Congress have authority under the Commerce Clause [of the United States Constitution] to regulate non-commercial, intrastate activity, when certain entities which have availed themselves of the state’s incorporation laws, use channels of commerce, and their anonymous operations substantially affect interstate and foreign commerce? The Supreme Court’s Commerce Clause decisions all point to the same conclusion: “No.”

The written opinion in this case makes for great reading most especially for those interested in Constitutional law analysis. At the end of the day, the drafters of the CTA and the lawyers for the Secretary of the Treasury defending the CTA failed to take into account that the CTA does not regulate economic or commercial activity on its face, which is generally required if one wants to rely on the Commerce Clause of the United States Constitution to justify the constitutionality of certain laws. The court even gently points out how the CTA could have been made constitutional through better drafting, rather than “inartful drafting” and even points out, relying on a prior Supreme Court case “that it is beyond this Court’s province to rescue Congress from its drafting errors, and to provide for what we might think is the preferred result.” Lamie v. U.S. Tr., 540 U.S. 526 (2004).

While this is just the beginning of the CTA appellate fight, and no doubt the government will appeal to the United States Court of Appeals for the Eleventh Circuit, which will most likely lead to the loser of that challenge appealing to the United States Supreme Court, at least for now the CTA’s registration requirements due by December 31, 2024, are dead on arrival but only as to the Plaintiffs in the aforesaid case, only. Whether the holding will be later broadened to include all other corporate entities is unknown at this time.

With all of this in mind, community associations remain caught up in the snare of the CTA and will need to comply with its registration requirements.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the January 2024 edition of the “Florida Community Association Journal“.)

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Civility in Community Associations | Does It Even Exist Anymore?

Civility in Community Associations: Does it Even Exist Anymore?

It seems the growing trend is that tempers  flare so much faster than in days gone by. One of the more difficult situations to deal with is when a cantankerous member of the association goes out of their way to make life miserable for their neighbors and/or their board. The situation can often get out of hand, requiring legal assistance, which then requires the entire community to bear the financial burden of the problem. In large part, the ability of an association to curtail such behavior will depend upon the type of behavior exhibited by the member, along with which remedies are provided for in the association’s governing documents, inclusive of its rules and regulations.

Most declarations have a nuisance provision similar to the following:

No noxious or offensive activities or noise shall be carried on or allowed, in or upon the common elements or in any unit, nor shall anything be done therein either willfully or negligently which may be or become an annoyance or nuisance to the other residents in the community. Such determination shall be made by the board of directors, whose decision shall be final and non-appealable.

Indeed, such a provision can be useful when it is necessary to seek an injunction to curtail the disruptive activities of the cantankerous member. When seeking to prevent “nuisance” conduct, it is important to document and gather as much evidence as possible to demonstrate that the underlying behavior has significantly impacted the peaceful enjoyment of the property by the other residents. Such documentation can include incident reports, photographs, owner complaints, security footage, etc.

It is also important for the board to work with the association’s attorney in adopting reasonable rules and regulations governing owner behavior at board meetings, membership meetings, and in general. Having such rules in place can lead to various consequences for the unruly individual, such as use right suspension and fining. But, sometimes such consequences may only amp up the situation rather than remedy it, and the association may need to file for an injunction to enforce its covenants and rules and regulations against the unruly member. If you wait until you have an unruly member to adopt rules and regulations governing conduct, then you may be “late to the dance.”

Neighbor-to-neighbor disputes can indeed be difficult because both neighbors can end up complaining to the board about the other neighbor’s behavior. Absent discrimination or harassment, the board is not necessarily obligated to play the role of referee and formally mediate disputes that are solely between neighbors. However, it should be noted that in such circumstances the owners have just as much right to enforce the provisions of the governing documents against their neighbor as does the association itself. Specifically, the community association statutes (Chapters 718, 719, and 720 F.S.) all contain language authorizing an individual resident to file legal action directly against another resident if such party believes his or her legal rights under the governing documents are being violated by the neighbor.

There is also recently adopted Florida legislation pertaining to harassment, or intimidation, based on religious or ethnic heritage. More specifically, §784.0493, Fla. Stat., provides that a person may not willfully and maliciously harass or intimidate another person based on the person’s wearing or displaying of any indicia related to any religious or ethnic heritage. Punishments range from second-degree misdemeanor through a third-degree felony if in the course of committing a violation the violator makes a credible threat to the person who is the subject of the harassment or intimidation. The law is also clear that a violation of this law is considered a “hate crime.”

Sometimes the harassing behavior does not take place in a physical setting, but rather online through social media. Such was addressed in a 2018 court case, Fox v. Hamptons at Metrowest Condo. Ass’n, Inc., Case No. 6:18-cv-1457-Orl-40GJK (M.D. Fla. Sep. 25, 2018). In this case, the owner (“Fox”) and the association had entered into a settlement agreement, and the association sought to have the terms of the settlement agreement enforced by the court. During the litigation the court not only found Fox in civil contempt but also further prohibited him from starting any new blogs, websites, or social media websites related to the association; and he was ordered to stop posting, circulating, and publishing any pictures or personal information about current or future residents, board members, management, employees, or personnel of the management company on any website, blog, or social media. It is crucial to understand that these restrictions were not part of the settlement agreement between the parties, but rather were imposed by the court on its own. Fox appealed on the basis that these broad prohibitions imposed by the trial court trampled on his First Amendment rights.

As an aside and by way of overgeneralization, in order for any of the constitutional protections to apply within a community association, there needs to be a nexus to the government. In this case, the nexus is relatively easy to discern because it was the judge, a government employee, who imposed the restriction on Fox’s speech, which then gave Fox the ability to challenge the court’s order using the First Amendment.

The appellate court confirmed that the trial court’s imposition of such permanent conditions constituted an unconditional prior restraint on free speech. The appellate court pointed out that,

…freedom of speech does not extend to obscenity, defamation, fraud, incitement, true threats, and speech integral to criminal conduct.

Fox’s use of social media to air his grievances did not fall into any of the exceptions, so therefore the court’s prohibitions on Fox were found to be in violation of the First Amendment. The appellate court noted that the trial court did not err when it enforced the agreed-upon terms of the previously executed settlement agreement between Fox and the association, and therefore upheld the trial court’s contempt order in that respect. At the end of the day, this case teaches us that a court-imposed, full-blown restriction on use of social media went too far. The question remains as to whether a court can curtail a member’s right to post on social media for a lesser period of time, and in regard to specific matters rather than the outright prohibition? Additionally, at times community associations adopt reasonable rules and regulations governing what can be posted on social media as related to their association, but enforcement of such provisions can be extremely difficult.

Sadly, in today’s world it is not a matter of “if” but rather “when” an association board will have to deal with owner hostility. All the above is a good reminder that if you wait until there is a problem to review the remedies available in the governing documents for curtailing cantankerous behavior, then it is far too late. By having a strongly worded nuisance provision in the declaration, along with rules governing civility at board and membership meetings, etc., an association can get in front of these situations and have the necessary tools at hand to deal with them effectively. When is the last time you asked your association’s attorney for recommendations to amend the declaration and adopt or revise rules and regulations governing civility?

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the February 2024 edition of the “Florida Community Association Journal“.)

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The Transparency Act and Community Associations

THE FEDERAL CORPORATE TRANSPARENCY ACT REQUIREMENTS AFFECTING ALL COMMUNITY ASSOCIATIONS

What Every Board Member and Manager Must Know

In January 2021 the Corporate Transparency Act (CTA) was enacted by Congress. In 2024 its far-reaching requirements are planned to go into effect. The CTA was adopted by Congress to provide additional transparency in entity structures and ownership in an effort to combat tax fraud, money, laundering, and other illicit activities. It is designed to capture more information about the ownership of specific entities operating in or accessing the United States marketplace. A recent Small Business Administration reports over 27 million small businesses that are considered non-employer firms and thus have no employees. Learning of the beneficial ownership of these entities, Congress hopes to crack down on their misuse. The CTA is particularly targeted to these types of small businesses operating as so called “shell companies.”

By the time you are finished reading this article, each reader should be familiar with some new terms, such as, “FinCen,” and “beneficial owner,” to name just a couple. While the practical enforcement procedures of the CTA are currently unknown, the reason why you must be familiar with the registration and continuing reporting requirements of the CTA is because failure to comply with requirements of the CTA can lead to fines from $500–$10,000 per violation and jail time of up to two years.

While there is little doubt that community associations do not pose a threat for terrorist activity, tax evasion, money laundering, and other illegal activity that is the target of the CTA, sadly, community associations are not currently exempt from the initial registration and continual updating requirements of the CTA. While the CTA requirements for compliance are not particularly difficult, they are onerous and will reveal certain personal information about board members and possibly managers, too. Also, at the present time there does not appear to be any type of exemption from the requirements of the CTA for law enforcement personnel and others who may have gone to extra lengths to keep certain personal information private. However, the CTA does require that this information remains confidential and only used for its intended purposes.

The CTA, amongst its other requirements, requires domestic reporting companies such as corporations, limited liability partnerships, and any other entity, created by the filing of a document with the secretary of state, or any similar office under the laws of the state, to comply with its reporting requirements. This includes community associations as they are organized as a business entity (i.e., a not-for-profit corporation). In addition to providing the information regarding the entity (meaning the association), the CTA requires certain information regarding the association’s “beneficial owners.” A “beneficial owner” is defined, in part, as a person who exercises substantial control of the reporting entity.

Therefore, minimally, according to the CTA, the president and vice president are deemed to “exercise substantial control over the entity” thereby seemingly requiring certain personal information to be provided to the federal “Financial Crimes Enforcement Network” or “FinCen” for short. These beneficial owners must report their name, date of birth, address, unique identifier number, such as a Social Security number, possibly a driver’s license number or passport number, and a photocopy of the non-expired document that evidences such information, too. Whether other officers and directors will be required to similarly provide personal information remains to be seen but it is likely.

Those filing the requisite documents to assist an entity with its compliance with the CTA must provide similar information too. Those qualified to file such documents for corporate entities with FinCen are as follows either:

i) the individual who directly files the document that creates the entity (this could be the attorney that files the articles of incorporation with the state to create the community association corporation); or,

ii) the individual who is primarily responsible for directing or controlling the filing of the relevant document by another (this prong could refer to the authorized individual as directed by the board of directors, such as the attorney, accountant, or management company personnel to file the necessary documentation with FinCen to comply with the CTA).

In addition to the initial compliance requirements, which must be accomplished within 2024 for already existing corporations, reports must also be updated within 30 days of a change to the beneficial ownership, or within 30 days after becoming aware of or having reason to know of inaccurate information previously filed. Under a strict reading of these provisions, this means that every time there is a change in board members and officers, a report of the change must be made to FinCen within 30 days of the event. As mentioned above, failure to comply with requirements of the CTA can lead to fines from $500–$10,000 per violation and jail time of up to two years.

There are procedures set out in the CTA for information sharing among the federal governmental agencies when in relation to terrorist activity and money laundering as well as requirements for compliance with FinCen when it seeks additional information in regard to such matters. The Internal Revenue Service, the Customs and Border Protection agency, and FinCen can all issue summons for purposes of civil enforcement of the CTA. There are even rewards for persons who report on another that lead to recovery of a criminal fine, civil penalty, or forfeiture that exceeds $50,000 where the payment of the reward is limited to 25 percent of the net amount of the fine or $150,000, whichever is less.

Federal community association lobbyists are seeking an amendment to the CTA so that community associations are expressly made exempt and not caught in its web. But, unless that happens, compliance with the CTA is required for Florida’s community associations. Whether such compliance will be performed by the community association‘s attorney, accountant, or manager remains to be seen, and hopefully additional guidance will be provided by the appropriate federal government agencies in the near future. Should you have the opportunity, please reach out to your federal legislators in regard to the need for an exception for community association compliance with the requirements of the CTA.

For those that would like to read up on the CTA, the starting point for the Act itself can be found at 31 U.S.C 5336. This is the CTA-enabling legislation passed by the United States Congress and signed into law by the President that provides lawful authority to executive departments and agencies of the federal government to both adopt and enact, after public notice and hearings, their own laws that have the same force and effect, as if our Congress enacted them. (As an aside in case you ever wondered how our country ended up with so many laws, it is because of this particular process.) Once 31 U.S.C 5336 was enacted into law, the requisite executive departments and agencies of the federal government went to work adopting all sorts of laws to carry out the intent of the enabling legislation. These laws are published in the Code of Federal Regulations (CFR).   The CTA is set out in section 1010 FCR 380 and is actually called “Reports of Beneficial Ownership Information;” however, its nickname is the “Corporate Transparency Act,” which has a better ring to it. The CTA can be cited to more fully as Part 1010 of the Code of Federal Regulations (CFR) Subpart C, section 380. It is a sub-part of CFR Title 31 titled “Money and Finance,” Subtitle B “Regulations Relating to Finance and Money,” Chapter X “Financial Crimes Enforcement Network Department of the Treasury.”

Due to the far reaching aspects of the CTA and its many nuances that could lead to many traps for the unwary, consultation with the association’s attorney and certified public accounting firm should be considered regarding any questions you may have in regard to the CTA, along with its registration and compliance requirements, too.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the January 2024 edition of the “Florida Community Association Journal“.)

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Kaye Bender Rembaum, P.L.