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The 2021 Florida Legislative Preview, as Related to Community Associations | The Good, The Bad and The Ugly

The 2021 Florida Legislative Preview, as Related to Community Associations | The Good, The Bad and The Ugly

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Disclaimer: In January 2022 the The Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation issued an opinion which drastically alters the information provided herein. Please consult with an attorney of your choosing to obtain the latest guidance in this ever evolving area.

Welcome to Rembaum’s Association Roundup’s 2021 legislative preview. The 2021 legislative session began on March 2 and ends April 30. Not only are all of the Bills discussed below subject to multiple changes, whether any of the Bills discussed below will become the law of the land remains to be seen.  Unless otherwise clarified, the proposed legislation discussed below applies to condominium, cooperative, and homeowners’ associations.

House Bill 72 provides for relief from liability for Covid -19 related claims. This Bill provides protection from claims for damages, injuries, or death. While community associations are not specifically named in the legislation, corporations not- for- profit are included as are for profit business entities and charitable organizations. Corporations not- for- profit include the overwhelming majority of Florida’s community associations. At the time a plaintiff files a lawsuit at the courthouse, the plaintiff must also submit an affidavit signed by a physician actively licensed in the state of Florida which attests to the physician’s belief, within a reasonable degree of medical certainty, that the plaintiff’s Covid – 19 related damages, injury or death occurred as a result of the defendant’s acts or omissions. At this very early stage of the proceedings, admissible evidence is limited to the evidence demonstrating whether the defendant made a good faith effort to substantially comply with authoritative or controlling government issued health standards for guidance at the time the cause of action accrued. If the court determines that the defendant made such a good faith effort, then the defendant is immune from civil liability. If the court determines that the defendant did not make such a good faith effort, then the plaintiff’s case may proceed. However, absent at least gross negligence proven by clear and convincing evidence, the defendant is not liable for any act or omission relating to a Covid – 19 related claim (a very difficult burden for the plaintiff to accomplish).

Senate Bill 1638 provides for a new condominium fraud investigation pilot program to be created within the Florida Division of Condominium, Timeshares and Mobile Homes of the Department of Business and Professional Regulation. The pilot program’s purpose is to facilitate the Division’s investigation of condominium related to fraud and corruption and is being initially tested only in Broward, Miami-Dade, and Monroe Counties. As a part of the legislation, the Division will be required to hire three financial investigators, five investigators with law enforcement experience and three clerical employees. For the purposes of the pilot program all monies are to be made available from the Division’s existing funds. From this writer’s point of view, the Division already needs additional funding to carry out its current duties and responsibilities. This Bill, while no doubt well intended, creates additional financial burdens on the Division with no clear funding source available.

Senate Bill 56 provides for yet another opportunity for a delinquent owner to bring their delinquent account current and avoid having to pay attorney’s fees. If the association sends out a statement of account, the association is required to provide a statement of account that designates the name of the owner, the due date and amount of each assessment, the amount paid on the account, and the balance due. In essence, this Bill adds additional financial burdens on the rest of the association’s membership who timely pay their assessments. A careful reading of this legislation suggests that while attorneys’ fees cannot be collected for sending such a letter, management companies may be able to do so because they are specifically not precluded in the legislation from doing so.

This particular legislation is somewhat surprising because everyone who lives in an association is aware that assessments are due for the overwhelmingly most part, either monthly or quarterly. As a matter of course, management companies routinely send out late notices as well. This legislation accomplishes nothing more than creating additional legislative and financial hurdles prior to the Assocation being able to proceed in collections against delinquent owners.  The only members who benefit from this legislation are the delinquent owners while it punishes those who timely pay their assessments.

Senate Bill 1998 provides for additional rights of owners pertaining to value adjustment board decisions and disputes with the Association.  Should the association initiate such a challenge, by way of this legislation, the affected association members are not necessarily considered indispensable parties to the action. This is important protection so as to protect the association from unfair dismissals of such actions when all members are not names in the litigation.  

This Bill also makes patently clear that any officer director or manager who knowingly solicits, offers to accept or except anything or service of value or kickback commits a felony of the 3rd degree which is punishable by up to five years in jail. 

To the itemized list of what comprises the “official records” of the association, this Bill adds all bank statements, cancel checks and credit card statements, all invoices transaction receipts, deposit slips or other underlying documentation that substantiate any receipt or expenditure of funds by the association. In addition, this legislation provides that all official records must be maintained in a manner and format prescribed by Division rule so that they are easily accessible for inspection. 

Presently, even if electronic records are stored on the website of the association, in the event of a member request for official records, pointing the requesting person to the records on the association’s website does not satisfy the current requirements making records available to owners. Senate Bill 1998 changes this to provide that the association may fulfill its obligations of providing access to the official records by directing the individual to the  website of the association’s so long as the records are posted on the website.

Of great concern is this next item set out in Senate Bill 1998 that will consume an inordinate amount of the manager’s (or a board member’s) time as related to each and every record request. In short, in response to a statutorily compliant written request to inspect records, the association must simultaneously provide an itemized list to the requester of all records made available for inspection and copying and provide a sworn affidavit in which the person facilitating the association’s compliance with the request attest to the veracity of the itemized list. The itemized list must also identify any of the associations records not made available. This list must be maintained by the association for seven years. The delivery by the Association of such an itemized list and affidavit creates a rebuttable presumption that the association complied with these requirements. As if it were not hard enough to find qualified board members to hold office, if this Bill passes into law, any director or member of the board or manager who knowingly, willfully, and repeatedly violates the aforementioned requirements will commit a misdemeanor of the second- degree. Repeatedly means two or more violations within a 12 month period. Moreover, any person who willfully and knowingly refuses to release or otherwise produce Association records with the intent to avoid or escape detection, arrest, trial or punishment for the commission of a crime or to assist another person with such avoidance or escape commits a felony of the 3rd degree punishable by up to five years in jail.

Senate Bill 630 primarily refers to condominium associations though, in a few instances it also references both cooperative and homeowners’ associations, too. This bill revises residential condominium unit owner insurance requirements by providing that if the condominium association’s insurance policy does not provide for rights of subrogation against the unit owner responsible for a casualty event, then the unit owner’s insurance policy MUST not contain subrogation rights against the association. There are those who believe that at present unit owners can subrogate claims against the condominium’s insurance policy   which then results in higher insurance fees to all owners. On the other hand, it can be argued that this particular piece of legislation will drive up the cost of insurance for all residential condominium unit owners because in many instances, they will not be in a position to subrogate their insurance claims against those actually responsible for having caused the damage.

The fee charged by a condominium association as related to the transfer of a unit will increase from a maximum of $100 to $150 and future increases in the fee that can be charged are now tied to the Consumer Price Index.  This may offer some relief to Associations although it would be preferred that the bill allow the Association to charge the actual cost of the background check so as to ensure the Association was not out any money to conduct the background check

In addition to making provision for electric vehicles, natural gas fuel vehicles are now included too. This Bill provides rights of owners to not only have a electric charging stations, but also natural gas charging stations. 

Other than election and recall disputes, prior to institution of court litigation a party to a dispute must either petition the Division for non-binding arbitration or initiate a new process, pre-suit mediation. Arbitration is binding on the parties only if all the parties to the arbitration agree to be bound to it, in writing.  A new mediation process will be available for parties in dispute to present the parties with an opportunity to resolve the underlying dispute in good faith and with a minimum expenditure of time and resources. The mediation proceedings must generally be conducted in accordance with the Florida Rules of Civil Procedure and can be used in lieu of the otherwise required mandatory non-binding arbitration process. This new type of pre-suit condominium mediation process follows the process set out in the homeowners’ association act. Remember, however, election and recall disputes are not available for mediation as those disputes have to be arbitrated by the Division or are subject to being heard in a local court of competent jurisdiction.

As to cooperative associations, a cooperative association may not require a member to demonstrate any purpose or state any reason for an official record request. A cooperative board member or committee member participating in a meeting via telephone, real time video conferencing or similar real time electronica or video communication counts toward quorum and such member may vote as it physically present.

As to homeowners’ associations, in addition to any of the authorized means of providing notice of a board meeting, the association may, by rule, adopt a procedure for conspicuously posting the meeting notice and agenda on the association’s website or an application (meaning an “app”) that could be downloaded on a mobile device. The meeting notice is also required to be physically posted on the Association property. Any rule adopted must in addition to other matters, must include a requirement that the association send an electronic notice to the members whose email addresses are included in the association’s official records (meaning the member opted in to receive their official notices from the association via email). The homeowners’ association ballots, sign in sheets voting proxies, all other papers, and electronic records relating to voting by partial owners must be maintained for at least one year after the date of the election, vote, or meeting. In addition, the homeowners‘ association must include in it with its official records, information the association obtains in a gated community in connection with guests visits to parcel owners or any other residence in the community.

Of interest, is a change in the manner in which a homeowners’ association can create restricted reserve accounts.  The only method available will require the affirmative vote and approval of a majority of the total voting interests of the association. No longer included is the possibility that a developer could have initially created restricted reserves.

Also, as related to homeowners associations, should Senate Bill 630 become law, then any amendment to a governing document, rule or regulation which prohibits a parcel owner from renting his or her parcel,  alters the authorized duration of a rental term, or specifies or limits the number of times the partial owner may rent his or her partial during a specified period, applies only to the parcel owner who consents, individually or through a representative, to the amendment, or  a new parcel owner acquires title to the parcel after the effective date of the amendment. Notwithstanding, an association may amend its governing documents to prohibit or regulate rental durations that are for terms of less than six months and to prohibit a parcel owner from renting his or her parcel more than three times in a calendar year which amendments would apply to all parcel owners. In addition, none of the aforementioned would apply if the association has 15 or fewer parcels.

Recall actions for condominium, cooperative, and homeowner associations can be brought either to the Division of Condominium, or a court of competent jurisdiction.

As to emergency powers, as related to condominium, cooperative, and homeowners’ associations, the emergency powers are clarified to apply to a broader range of events such as the present Covid – 19 pandemic. In addition to board meetings, committee meetings, elections and membership meetings can be conducted in whole or in part by telephone, real time video conferencing or similar real time electronica or video communications. Associations can implement a disaster plan or emergency plan before, during or following the event village the state of emergency is declared. In addition to the advice of emergency management officials, now, associations can rely on advice from public health officials to determine whether the association property can be safely inhabited, accessed or occupied. In addition to taking action to mitigate further damages, the board can take action to mitigate further injury or contagion. Additional clarification is provided that during the state of emergency, the association cannot prohibit owners, their guests and agents or invitees from accessing a unit or the common elements for the purpose of ingress to an egress from the unit and when necessary in connection with the sale, lease or other transfer of title to a unit or for the health and safety of such person unless a governmental order or determination or public health directive from the centers for disease control and prevention has been issued prohibiting such access to the unit.

House Bill 21 provides that a person or party may not bring a cause of action for a material violation that exists within a completed building structure or facility which may reasonably result or has resulted in physical harm to a person or significant damage to the performance of a building or a system unless the party has submitted a claim for the alleged material violation under an applicable warranty and the warranty provider denies the claim or offers a remedy that is unsatisfactory to the person for a party within the time limit provided for in the warranty. 

Senate Bill 1966 would effectuate a change to qualifications to be a board member. Presently, if a potential candidate is delinquent in a monetary obligation, they are not qualified to be a candidate. If this bill becomes a law, then being delinquent in any monetary obligation is no longer relevant. Rather, the potential candidate would have to be delinquent in the payment of an “assessment”. In addition, in an effort to describe when an owner is actually delinquent, if payment is not made by the due date as specifically identified in the declaration of condominium bylaws or articles, then the payment is delinquent however if it due date is not specified then, the due date is the first day of the assessment period. On a different note, the condominium association’s annual budget must be proposed to the unit owners and adopted by the Board of Directors no later than 30 days before the beginning of the fiscal year.

Senate Bill 1490 is perhaps the most risky piece of legislation this entire legislative session, in this author’s sole opinion, in that it allows condominium associations, through a vote of the owners, the ability to invest the otherwise sacrosanct restricted reserve accounts with an investment advisor. While the legislation attempts to minimize risk by requiring the association to adopt a written investment policy annually, it nevertheless allows the investment advisor to invest funds not deposited into depository accounts. While the investment advisor is held to the high standard of being a “fiduciary” nevertheless the reserve monies will be at a much higher risk of loss.

Stay tuned to learn if these Bills become law.  Remember, there is a lot of time left in the legislative session to further turn these Bills into legislative sausage.

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Selective Enforcement: A Grossly Misunderstood Concept

Without exception, the affirmative defense of “selective enforcement” is one of the most misunderstood concepts in the entire body of community association law. How often have you heard something like this: “The board has not enforced the fence height limitation, so it cannot enforce any other architectural rules”? Simply put, nothing could be further from the truth.

When a community association seeks to enforce its covenants and/or its board adopted rules and regulations, an owner can, under the right circumstances, assert an affirmative defense such as the affirmative defense of selective enforcement. An affirmative defense is a “yes I did it, but so what” type of defense. In civil lawsuits, affirmative defenses include the statute of limitations, the statute of frauds, waiver, and more. However, it’s just not as simple as that. For example, a fence height limitation is a very different restriction than a required set back. Under most if not all circumstances, the failure to enforce a  fence height requirement is very different from the failure to enforce a setback requirement. Ordinarily, the affirmative defense of selective enforcement will only apply if the violation or circumstances are comparable, such that one could reasonably rely upon the non-enforcement of a particular covenant, restriction, or rule with respect to their own conduct or action.

In the seminal case of Chattel Shipping and Investment Inc. v. Brickell Place Condominium Association Inc., 481 So.2d 29 (FLA. 3rd DCA 1986), 45 owners had improperly enclosed their balconies. Thereafter, the association informed all of the owners that it would thereafter take “no action with respect to existing enclosed balconies, but prohibit future balcony constructions and enforce the enclosure prohibition.” As you might have already predicted, nevertheless, thereafter an owner of a unit, Chattel Shipping, enclosed their unit; and the association secured a mandatory injunction in the trial court requiring the removal of the balcony enclosure erected without permission. The owner appealed. In the end, the appellate court disagreed with the owner who argued that the association decision to enforce the “no enclosure” requirement only on a prospective basis was both selective enforcement and arbitrary. The court held that the adoption and implementation of a uniform policy under which, for obvious reasons of practicality and economy, a given building restriction will be enforced only prospectively cannot be deemed “selective and arbitrary.”

In Laguna Tropical, A Condominium Association Inc. v. Barnave, 208 So. 3d 1262, (Fla. 3d DCA 2017), the court again used the purpose of the restriction in its determination of whether the association engaged in selective enforcement. In Laguna Tropical, a rule prohibited floor covering other than carpeting unless expressly permitted by the association. Additionally, the rule provided that owners must place padding between the flooring and the concrete slab so that the flooring would be adequately soundproof. In this case, an owner installed laminate flooring on her second floor unit and the neighbor below complained that the noise disturbed his occupancy. As a result of the complaint, the association demanded that the owner remove the laminate flooring. However, the owner argued selective enforcement because the association only enforced the carpeting restriction against the eleven exclusively upstairs units in the condominium. The court noted that the remaining units in the condominium were either downstairs units only, or were configured to include both first-floor and second-floor residential space within the same unit.

Again, the court looked to the purpose of the prohibition on floor coverings other than carpet and found that the prohibition was plainly intended to avoid noise complaints. Therefore, no selective enforcement was proven because no complaints were shown to have arisen regarding any units except the eleven exclusively upstairs units.

What about cats and dogs? In another case, Prisco v. Forest Villas Condominium Apartments Inc., 847 So. 2d 1012 (Fla. 4th DCA 2003), the Fourth District Court of Appeals heard an appeal alleging selective enforcement regarding the association’s pet restrictions. The association had a pet restriction which stated that other than fish and birds, “no pets whatsoever” shall be allowed. In this case, the association had allowed an owner to keep a cat in her unit, but refused to allow another owner to keep a dog. The association argued that there was a distinction between the dog and the cat. However, on appeal, the court found that the restriction was clear and unambiguous that all pets other than fish and birds were prohibited. Therefore, the court reasoned that the facts which make dogs different from cats did not matter because the clear purpose of the restriction was to prohibit all types of pets except fish and birds. In other words, the court held that the plain and obvious purpose of a restriction should govern any interpretation of whether the association engaged in selective enforcement.

If an association has a “no pets” rule and allows cats, must it allow dogs, too? There is a long line of arbitration cases that have distinguished dogs from cats and other pets for purposes of selective enforcement. For example, in Beachplace Association Inc. v. Hurwitz, Case no. 02-5940, a Department of Business and Professional Regulation Division of Florida Condominium Arbitration case, the arbitrator found, in response to an owner’s selective enforcement defense raised in response to the association’s demand for removal of a dog, that even though cats were allowed, that comparison of dogs to cats was not a comparative, like kind situation. Further the arbitrator found that cats and dogs had significant distinctions such as barking versus meowing, and therefore the owner’s attempted use of the selective enforcement argument failed.

But, in Hallmark of Hollywood Condominium Association Inc. v. Andrews, Case 2003-09-2380, another Department of Business and Professional Regulation Division of Florida Condominium Arbitration case, the learned arbitrator James Earl decided that because the association has a full blown “no pets of any kind”  requirement and since cats were allowed, then dogs must be allowed, too. In other words, the defendant owner’s waiver defense worked. But, the arbitrator wisely noted in a footnote as follows: “The undersigned notes that there is a long line of arbitration cases that have distinguished dogs from cats and other pets for purposes of selective enforcement. However, the fourth district court of appeal has ruled that where the condominium documents contain particular language prohibiting all pets, any dissimilarity between dogs and cats is irrelevant and both must be considered. See Prisco.” The distinction between the two arbitration cases could be explained because of timing in that the 4th DCA’s decision in Prisco was not yet published when Hurwitz was decided.

From these important cases, it can be gleaned that

(i) even if an association has ignored a particular rule or covenant, that by giving written notice to the entire community that it will be enforced prospectively, the rule or covenant can be reinvigorated and becomes fully enforceable once again (though of course, prior non-conforming situations may have to be grandfathered depending on the situation),

(ii) if an association or an owner is seeking an estoppel affirmative defense, they must be sure all of the necessary elements are pled,

(iii) at times a court will look to the purpose of the rule itself where it makes sense to do so, and

(iv) dogs and cats are different, but they are both considered “pets.”

Remember to always discuss the complexities of re-enforcement of covenants and rules and regulations that were not enforced for some time with your association’s legal counsel in an effort to mitigate negative outcomes. The process (commonly referred to as “republication”) can restore the viability of a covenant or rule that may have been waived due to the lack of uniform and timely enforcement.

(Reprinted with permission from the March 2021 edition of the Florida Community Association Journal) 

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Community Association Leasing | Act Now Before It Is Too Late!

If your homeowners association has not adopted leasing restrictions or wants to amend existing leasing restrictions, and you want any new restrictions to be effective against 100 percent of the members, then the board should consider taking steps to amend the declaration of covenants, right now! Well, in any event, prior to the date the proposed legislation may, if approved by the legislature and governor, become law, which is typically July 1, 2021. As discussed in greater detail below, if the Florida Legislature adopts leasing legislation into Chapter 720, the Homeowners Association Act, similar to that which is currently in Chapter 718, the Condominium Act, you will want to be sure that your HOA has properly approved and recorded any desired leasing amendments into your community’s declaration to ensure equal enforceability against all owners in the community.

We are aware that some homeowners associations have leasing restrictions only set forth in the board-made rules. In our opinion, having leasing restrictions only set out in the rules make such rules far more vulnerable to a successful legal challenge than if such restrictions were set out in the declaration. This is because the authority to adopt such rules must be readily identifiable from the authority set out in the declaration. If you have leasing restrictions in your association’s rules, then it is recommended that you have them reviewed by legal counsel to provide further guidance on their enforceability.

By way of background, in 2004 the Florida Legislature substantially revised the ability of a condominium association to enact and otherwise amend leasing restrictions by enacting §718.110(13), Florida Statutes, which, having been since amended, presently provides the following:

An amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment. [emphasis added]

So, after this legislation became effective, if a condominium association had not yet adopted leasing covenants or desired to amend existing rules that

  1. prohibited rentals,
  2. altered the duration of the rental term, or
  3. limited the number of times the owners could lease during a specified period of time, such amendments were required to be set out in the declaration of condominium and would only be enforceable against those who voted in favor of adopting the amendment and those owners who took title to their unit after the amendment had passed and taken effect.

Another important consideration, albeit at times mildly confusing, is the effect of having Kaufman language in the declaration. To understand this concept, it is important to first understand what the term Kaufman language means and how to identify it. When Kaufman language is included in a declaration, in the simplest of terms, it means that all new legislation applies to that entire declaration even if it changes existing substantive rights. An example of Kaufman language follows: “This Declaration is subject to Chapter 718, Florida Statutes, as it is amended from time to time.”

(The Kaufman language is the latter emphasized phrase.) Of course, a declaration associated with a homeowners association would reference Chapter 720, Florida Statutes.

If the declaration for your homeowners association includes Kaufman language, then if the proposed legislation is enacted into law, having leasing restrictions that were amended into the declaration might be problematic and subject to challenge unless the new legislation makes it crystal clear that it only applies in the future or prospectively, which is a concept that has to be balanced against the standard of statutory interpretation that legislation is not applied retroactively unless the legislation expressly provides for such retroactive interpretation. In other words, including Kaufman language in the declaration may allow a member to assert that their association’s prior leasing amendments that had applied to all members are now only enforceable against those members who voted in favor of it, as required by the new legislation (assuming it is actually signed into law). Whether such an argument would prevail in a court of law is difficult to predict. In any event, hopefully, this concern will be alleviated in the legislation.

As an aside, by inclusion of Kaufman language in the declaration, then all of the changes to the Florida Statutes, including changes to substantive rights, will apply to the declaration without regard to whether the changes are beneficial or detrimental to the association and its unit owners. However, Kaufman language can also be inserted into a declaration on a provision-by-provision basis, such as for fining and lender assessment obligations upon taking title to a home through foreclosure, which is far superior in that only certain substantive legislative amendments will apply as compared against each and every legislative change.

What does all of this mean? At a minimum, it is patently clear that the leasing legislation will apply to all homeowners associations. For those homeowners associations without Kaufman language in their declaration, then the legislation would apply prospectively, meaning it would only apply against those who voted in favor of the leasing restrictions until title to the home changes. If, however, Kaufman language exists in the declaration, providing for retroactive application of the new legislation, and the new legislation does not clarify it is only effective prospectively, then upon member challenge the association may have the burden of proving which members did and which members did not vote in favor of the previously enacted leasing restrictions.

The bottom line is, if your homeowners association has not yet adopted leasing restrictions into the declaration, then consider doing so ASAP. If the declaration contains Kaufman language, then to avoid possible retroactive application of the proposed leasing legislation, the Kaufman language can also be amended at that time. Please consult with your association’s legal counsel to review your current declaration and rules regarding any leasing restrictions before taking any action to proceed with leasing amendments, as this information is intended as summary only, and there are additional considerations to take into account as well.

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Discriminatory Practices: Is Your Association Prepared?

On September 26, 2016, Rembaum’s Association Round Up published an extremely important article regarding a community association’s potential liability when allegations by one member accuse another member of a discriminatory practice. (Click HERE to view the 2016 article). On September 13, 2016, HUD made clear that a housing provider is responsible for discriminatory practices that may take place. In its Rules and Regulations set out in Chapter 24, Part 100 of the Code of Federal Regulations, effective which further interprets the Federal Fair Housing Act, HUD explained that it believes that, “we are long past the time when racial harassment is a tolerable price for integrated housing; a housing provider is responsible for maintaining its properties free from all discrimination prohibited by the Act.” Those regulations became effective on October 14, 2016.

In this author’s opinion, HUD went way too far by mandating that housing providers act as the investigator, police, judge and jury in cases of alleged discrimination. After all, there are countless Fair Housing offices in each state where complaints can be filed and are actively investigated, often times with only a bare inference. Community association board members are volunteers with no required special training other than to be “certified” within 90 days of taking office, which certification can be met by signing a one-page form acknowledging duties or taking a two-hour class. Neither the individual board members nor the community as a whole should have to bear liability for its board of directors not taking action in a neighbor to neighbor dispute. Afterall, the court room is the proper setting where such matters should be resolved.

In the January 25, 2021, edition of the Palm Beach Post reporter Mike Diamond Special to Palm Beach Post USA TODAY NETWORK, authored an article titled “Judge Won’t Dismiss HOA Religious Bias Suit.” In the article the judge was quoted as follows: ““the La-Grassos [the plaintiff’s] have plausibly alleged a claim against the association for its failure to respond to or seek to control Ms. Tannenholz’s allegedly discriminatory conduct.” Amongst other things, the allegation is that Tannenholz’s told La-Grassos, “you do not belong in a community that is 80% Jewish and that La-Grassos should “move the F… out and go to a white supremist community.”

But for HUD’s position that a housing provider can have liability for discriminatory practices of the residents it is unlikely the association would be a defendant in this lawsuit. By forcing housing providers, such as Florida’s countless condominium, homeowners’ and cooperative associations, to interject themselves into what should be private disputes amongst neighbors, HUD is providing the deepest of pockets to the plaintiff’s attorneys. At the end of the day, it is just another reason to sue the innocent community association to create liability where there should not be any in the first place.

Practical Tip no. 1: In light of this lurking danger, be sure to check in with your association’s insurance agent to be sure the association has proper liability coverage for accusations of discrimination.

Practical Tip no. 2: Also, given that there can even be personal liability in such actions, board members would be wise to speak to their own personal insurance agents too… Afterall you never know when that umbrella policy may come in handy. Remember this, too: if one board member has knowledge about an event, then such knowledge can be imputed to all board members as if they are all similarly aware. In other words, when one board member knows, then the association itself is on notice.

Practical Tip no. 3: Consider formally adopting a “no discrimination” type of rule. It could be as simple as “discrimination of any kind will not be tolerated”.

Practical Tip no. 4: If your association is made aware of an alleged discriminatory practice, then a written record of such allegation and the association’s efforts to remedy the situation should be made.

Be sure to discuss each and every alleged discriminatory practice brought to the attention of the board and/or its manager with the association’s attorney to obtain the proper guidance needed.

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Financial Screening of Purchasers: How Far Is Too Far?

A few months back a case came before the county court in the 20th Judicial Circuit for Collier County, wherein a prospective buyer challenged the validity of a board-adopted rule which required that all prospective buyers provide two years of tax returns with their application for ownership approval. This requirement was in addition to the background check and credit check that were also required. While this is only a county court case and, therefore, has no precedential value other than to the parties themselves, there are principles addressed of which associations and managers should be aware; even though many learned attorneys would opine that the conclusions of the court are legally flawed under the facts of the case and, if appealed, would likely be overturned. Nevertheless, there are still nuggets of knowledge that can be gleaned from this case.

In this case, Mech v. Crescent Beach Condominium Association, Inc., Case No. 19-SC-3498, decided June 2020, the purchaser, who was the plaintiff, was seeking to buy a unit at Crescent Beach Condominium for $400,000, which was to be paid in cash. The purchaser purportedly had a clean background and a credit score of 800. Nonetheless, the board required that, like all other prospective purchasers at the condominium, this purchaser needed to produce his tax returns in order for the association to approve the transfer. The purchaser refused to provide his tax returns and cited his good credit score and clean background as evidence enough for approval. Eventually, an impasse was reached, and the purchaser canceled the contract. Then he brought the county court lawsuit challenging the requirement. (Generally speaking, typically under current Florida law, the purchaser would not have legal standing to even bring the claim against the association; but it does not appear that this legal infirmity was raised by the association, which allowed the case to proceed.)

The purchaser challenged the rule, arguing that the rule was not within the scope of the association’s authority to adopt, nor did it reflect reasoned decision-making. (It is noteworthy to point out that, after the initiation of the lawsuit, the association amended its declaration of condominium to provide that the association may require tax returns in an application for approval of a sale. However, this is not relevant to the conclusions of the Court in this case since it occurred after the litigation was filed.)

The association argued that the tax returns are necessary because they provide more information than a credit report and could help ensure that the potential purchaser is “a good credit risk.” The Court, however, did not agree, calling the argument “nonsensical.” The Court goes on to identify what this judge considers to be the best indicator of a person’s financial history, and as a result, it is the only information the association is allowed to seek. (We note that this conclusion is also without a stated legal basis.)

In the final judgment, some might argue that the Court goes way beyond what proper judicial consideration and conclusions typically contain and indicates that she could find “NO justification for the invasive requirement that a full, or even partial, return would be required when, in fact, the board already requires a full background check and credit check.” While no legal support for the conclusion was provided, the Court held that the request for tax returns was invasive and unnecessary and that the requirement was “shocking.”

The Court objected to the blanket requirement that applied to every applicant regardless of the results of their background and credit checks. Had the tax returns only been required when an applicant’s credit history showed a history of financial instability or delinquencies, the rule may have been upheld by the Court. How-ever, the Court held that “to take a position that ‘every person’ who applies to be a member at [the association] is patently unreasonable and shall be stricken.” Lastly, also without a legal basis or ability, the Court ordered the association to strike all reference in its condominium documents which require potential purchasers to produce tax returns unless the association can show good cause to request the information.

A brief discussion regarding the adoption of rules and regulations is necessary to highlight lessons that can be learned from this case. Generally, both condominium and homeowners association governing documents will typically provide that the board of the directors has the authority to adopt rules and regulations for the community. While some governing documents may contain restrictions requiring a membership vote to approve new rules, it is common for the governing documents to provide the board with the authority to adopt rules and regulations. (Careful review of the documentary authority for each community is recommended as some may limit the rule-making authority to common areas only and not to the residential property within the community.)  Although the board is generally authorized to adopt rules and regulations, those rules and regulations must not conflict with any provision expressly set out in the governing documents or reasonably inferred from them, and they must be reasonable. (This should be contrasted with covenants recorded in the County’s official records, which may be unreasonable and still be legally enforceable under long-standing Florida case law.)

In Beachwood Villas Condominium v. Poor, et. al., a 1984 Fourth District Court of Appeal (4th DCA) case  in which several owners challenged rules enacted by their association’s board of directors, the Court noted that there could be two sources of use restrictions: (i) those set out in the declaration of condominium and (ii) those adopted by the board. As to the use restrictions set out in the declaration, the court held that such restrictions are “clothed with a very strong presumption of validity,” as initially provided in Hidden Harbor Estates v. Basso (a 1981 4th DCA case).

In examining board-adopted rules, the court first must determine whether the board acted within its scope of authority—in other words, whether the board had the express authority in the documents to adopt the rule in the first place. If the answer is “yes,” the second question to determine is whether the rule conflicts with an express provision of the governing documents or one that is reasonably inferred. (If the documents are silent on an issue, the inference is that it is unrestricted. Adopting a rule to restrict a topic that the declaration is otherwise silent about would conflict with the inferred unrestricted use and therefore be unenforceable.)  If these first two issues are found to exist, the court will then determine if the rule is reasonable. The board’s exercise of its reasonable business judgment in adopting a rule is generally upheld so long as the rule is not “violative of any constitutional restrictions and does not exceed any specific limitations set out in the statutes or condominium documents.”

In examining your own board-adopted rules, ask the following:

  • Did the board have the power to adopt the rule?
  • Is the rule in accord with with the declaration, articles of incorporation, or bylaws?
  • Is the rule reasonable under the circumstances? (While ultimately only a court can make this final determination, the board should use its best judgment, with assistance of its counsel, to reach this decision.)

If the answer to these three questions is “yes,” then the rule should be found to be valid and enforceable by the court upon an owner challenge.

Ultimately, what can be gleaned from Mech v. Crescent Beach Condominium Association Inc. is that even if the association acts reasonably when adopting rules and even when amending the declaration, a lower court judge can reach almost any decision it wishes. Had the provision at issue only required tax returns when the background or credit checks revealed that the prospective purchaser had a history of financial irresponsibility, the provision may have withstood judicial challenge by this particular judge. Additionally, had the provision requiring tax returns been set out in the declaration before the initiation of the lawsuit, the outcome may have been different under existing, well-established case law.

Bottom line, whenever the board is considering new rules, it is recommended that the board consult with the association’s legal counsel before adopting them.

(Reprinted with permission from the September 2020 edition of the Florida Community Association Journal)

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Hosting Virtual Meetings via Zoom | What You Need to Know

The most asked question of 2020 is this: Can our association host our board and annual meetings using Zoom or another similar virtual/electronic platform? There is no doubt that technology will always advance faster than legislation. In fact, advances in technology seem to take place in light speed where as advances in legislation seem to travel at the speed of your average turtle.

As to board meetings, §718.112(2)(b)5 of the Condominium Act provides, “A board or committee member’s participation in a meeting via telephone, real-time videoconferencing, or similar real-time electronic or video communication counts toward a quorum, and such member may vote as if physically present. A speaker must be used so that the conversation of such members may be heard by the board or committee members attending in person as well as by any unit owners present at a meeting.” Note that similar provisions are provided for cooperative associations in §719.106(1)(b)5 and in §617.0820 for homeowners’ associations.

As to virtual membership meetings, Chapter 617 Florida Statutes, applicable to all of Florida’s not-for-profit community associations, provides in §617.0721(3) that if authorized by the board of directors, and subject to such guidelines and procedures as the board of directors may adopt, members and proxy holders who are not physically present at a meeting may, by means of remote communication participate in the meeting and be deemed to be present in person and vote at the meeting if the corporation implements reasonable means to verify that each person deemed present and authorized to vote by means of remote communication is a member or proxy holder; and the corporation implements reasonable measures to provide such members or proxy holders with a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to communicate and to read or hear the proceedings of the meeting substantially concurrent with the proceedings. If any member or proxy holder votes or takes other action by means of remote communication, a record of that member’s participation in the meeting must be maintained by the corporation in accordance with §617.1601. [emphasis added]

In addition, the Condominium, Homeowners Association, and Cooperative Acts (Chapters 718, 720, and 719, Florida Statutes, respectively), provide that members have a right to speak during board and membership meetings (more on that below). In fact, each of the Acts also provide that board members can even communicate, but not make decisions, via email. Rule 61B23.001(2) of the Florida Administrative Code provides, in relevant part, that “all unit owners have the right to attend and observe all meetings of the board…” With this limited guidance as our backdrop, let’s ask the question slightly differently.

Can our association host our board and annual meetings via Zoom or another electronic platform so long as all members have their opportunity to speak at the relevant times and all other statutory requirements are followed, such as a speakerphone in the designated meeting location for condominium association board meetings? The answer, simply put, is “yes,” you can.

It is extremely important when planning on hosting the meeting through a Zoom-type platform that you think ahead about the implications. The type of vote that will occur at any membership meeting must be carefully considered. For example, what if there is an election and members have not yet opted to vote electronically? Provisions must be made to gather ballots up to the closing of the balloting at the membership meeting and for write-in candidates, too, as applicable (in a homeowners association type setting). Instructions must also be clearly provided to the members letting them know how the votes will be counted and ensuring the membership that they can observe the entire tabulation of the voting process. For example;

     Dear Members, In accordance with s. 720.316, Florida Statutes, in order to protect the health, safety, and welfare of the Association’s members, except for the members who volunteer to assist with the tally of the ballots (along with the management team and the Association’s legal counsel), there will be NO in-person attendance at the annual meeting. Although there will be no in-person attendance, the annual meeting will be broadcast through Zoom (online video conferencing) for those who wish to remotely attend and observe the annual meeting, including the tallying of ballots. You may join the Zoom meeting at the appointed time by using the following link in your web browser: ___________ or through the Zoom application on your smart phone or tablet with Meet- ing ID: __________ and entering the following Password: ___________.

Since we are on the subject of board and membership meetings and we are in “election season,” as it is affectionally referred to, let’s take a quick look at meeting notice requirements, eligibility, and terms for board of directors, vacancies, election disputes, and a members’ right to speak.

BOARD MEETING NOTICE REQUIREMENTS

Pursuant to §718.112(2)(c)1, 719.106(1)(c), and 720.303(2)(c), Florida Statutes, notice of a meeting of the board must be posted in a conspicuous place on the property at least 48 continuous hours preceding the meeting, unless the governing documents of the association require additional notice. However, notice of meetings of the board at which regular or special assessments against unit owners or at which amendment to the rules regarding unit use will be considered must be mailed, delivered, or electronically transmitted to the owners and posted conspicuously on the property not less than 14 days before the meeting. Remember, too, electronic transmission is only permitted if the owner provides prior written consent.

As discussed in more detail below, for annual meetings of the membership where an election will be held, the notice requirements for condominium and cooperative associations differ from the requirements for homeowners associations. However, for other meetings of the members, unless a homeowners association’s bylaws provide differently, the notice requirements are the same. Pursuant to §718.112(2)(d)3 and 719.106(1)(d), Florida Statutes, notice of a meeting of the membership must be given to each owner and posted in a conspicuous place on the property at least 14 days before the meeting. For homeowners associations, pursuant to 720.306(5), Florida Statutes, notice of meetings of the members must be given 14 days prior to the meeting, unless the bylaws provide differently. For meetings of the members where an election will be held, pursuant to §718.112(2)(d)4 and 719.106(1)(d)1, Florida Statutes, the first notice of the annual meeting of the membership must be sent to the members at least 60 days prior to the meeting, and the second notice must be provided at least 14 days to the members and posted conspicuously on the property at least 14 days in advance before the meeting. For homeowners associations’ annual meetings, notice must be provided at least 14 days before the meeting unless the bylaws provide differently pursuant to §720.306(5), Florida Statutes.

ELIGIBILITY AND TERMS FOR BOARD OF DIRECTORS

The eligibility requirements for board members are set out in §718.112(2)(d)2, 719.106(1)(a), and 720.306(9)(b). Pursuant to the foregoing, a person who is delinquent in the payment of any fine, fee, or other monetary obligation to the association is not eligible to be a candidate for the board. Additionally, any person who has been convicted of a felony is not eligible to serve on the board unless the person’s civil rights have been restored for at least five years. With the passage of Amendment 4, voting rights were restored to people convicted of a felony. It is unclear what impact Amendment 4 will have on the restrictions to eligibility for board members.

Additionally, condominium associations should be aware that §718.112(2)(d)2 was amended to provide that a board member may not serve more than eight consecutive years unless approved by two-thirds of all votes cast in an election or if there are not enough eligible candidates to fill vacancies on the board. However, this provision applies prospectively, which means the clock did not start until the law went into effect on July 1, 2018. Additionally, this only prohibits eight consecutive years of service. If a board member has a break in service, then the clock would begin again.

For condominium and cooperative associations with 10 or more units, co-owners of units are not eligible to serve on a condominium board unless they own more than one unit or unless there are not enough eligible candidates. This is not applicable to homeowners associations.

Governing documents may provide that you must be an owner to serve on the board, but generally they cannot establish other eligibility requirements, such as residency requirements.

VACANCIES

In the event of a vacancy on the board, pursuant to §718.112(2)(d)9, 719.106(1)(d)6, and 720.306(9)(c), unless the bylaws provide otherwise, the vacancy may be filled by the affirmative vote of a majority of the remaining directors, even if the remaining directors constitute less than a quorum, or if there is only one director remaining. In the event there is only one director remaining on the board, that director can choose to appoint people to fill all of the vacancies.

ELECTION DISPUTES

Election disputes for condominium, cooperative, and homeowners associations are handled by the Florida Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares, and Mobile Homes (the “DBPR”) through mandatory arbitration in accordance with §718.1255(1), 719.1255, and 720.311(1), Florida Statutes. Pursuant to §718.112(2)(d)4.c, 719.106(1)(d)1.a, and 720.306(9)(a), any challenge to an election must be brought within 60 days after the election results are announced. Additionally, a board member cannot be subject to a recall when there are 60 or fewer days until a scheduled election, or when 60 or fewer days have not elapsed since the election of the board member sought to be recalled.

MEMBER PARTICIPATION

Members have a right to speak at meetings of the membership. Pursuant to §718.112(2)(c) and 719.106(1)(d)4, Florida Statutes, members of condominium and cooperative associations have the right to participate in meetings of the unit owners with reference to all designated agenda items. Pursuant to §720.306(6), members of a homeowners association have the right to speak with reference to all items opened for discussion and all items included on the agenda. In other words, in a homeowners association, members can speak on any matter that was opened for discussion, even if the matter was not listed on the agenda for the meeting. Additionally, §720.306(6), Florida Statutes, provides that a member must be allowed at least three minutes to speak on any item.

Members also have a right to speak at meetings of the board of directors. [Pursuant to §718.112(2) (d)7 and 719.106(1)(c), Florida Statutes, members of condominium and cooperative associations have a right to speak at board meetings with reference to all designated agenda items. Pursuant to §720.303(2)(b), members have a right to speak at a board meeting with reference to all designated items.]

In all instances condominium, cooperative, and homeowners association boards are authorized to adopt reasonable rules governing frequency, duration, and other manner of member comments for the board and membership meetings. To make the member comments more meaningful, consider permitting them after the board fully discusses each item, prior to voting, and prior to moving on to the next item.

It is recommended you consult with your association legal counsel on the adoption of reasonable rules to ensure your virtual/electronic meetings run smoothly while also ensuring that they are in compliance with the association’s governing documents, Florida Statutes, and Florida Administrative Code.

(Reprinted with permission from the January 2021 edition of the Florida Community Association Journal) 

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Association Rules After Expiration of the Governor’s State of Emergency Order for COVID-19

By the time you read this article, the governor’s declared state of emergency as related to the coronavirus may have reached an end. If not, well, hopefully it will soon enough due to significant diminution of the coronavirus. What then? What happens to the rules adopted by an association in an effort to combat the coronavirus? Can an association turn away guests of residents? Can the number of people allowed to use the amenities, such as the pool, be limited? Just how far can the board go in its efforts to create reasonable rules?

The emergency powers set out in §720.316 of the Homeowners’ Association Act, §718.1265 of the Condominium Act, and §719.128 of the Cooperative Act begin essentially the same. They each begin with the following phrase:

To the extent allowed by law and unless specifically prohibited by the declaration or other recorded document [or declaration of condominium, its articles or bylaws or cooperative documents, as the case may be], the articles, or the bylaws of an association, and consistent with the provisions of s. 617.0830, the board of administration, in response to damage caused by an event for which a state of emergency is declared pursuant to s. 252.36 in the locale in which the association [or condominium or cooperative as the case may be]   is located, may, but is not required to, exercise the following powers:…

In addition, they each end essentially the same, too, as follows:

The special powers authorized under subsection (1) shall be limited to that time reasonably necessary to protect the health, safety, and welfare of the association and the unit owners and the unit owners’ family members, tenants, guests, agents, or invitees and shall be reasonably necessary to mitigate further damage and make emergency repairs.

Therefore, the emergency power legislation contemplates use of the emergency powers in response to damage caused by an event for which a state of emergency has been declared by the governor and for a reasonable amount of time after the state of emergency is over, as necessary. But, as related to the coronavirus, can the emergency powers still be relied upon at the conclusion of the governor’s declared state of emergency? It is undisputable that the emergency power legislation was drafted in response to hurricanes, where actual damage to buildings and other property occurred, and not for the epidemic of an unexpected deadly virus. But, at least this ever-important legislation lent its applicability to the coronavirus situation and was relied upon by boards and lawyers alike to allow association board members to approve rules in an effort to contain the coronavirus. In response to the virus, some association boards restricted realtor showings and construction work, limited or even prevented guests, and the list goes on and on. Often these rules were adopted with limited notice to the members, sometimes outside of properly noticed meetings (which, depending on the situation may have been, was permitted at the time pursuant to the statutory emergency powers, which still require providing reasonable notice under the circumstances). The further in time we are from the end of the declared state of emergency, the less the emergency powers legislation can be relied upon…most especially because they were drafted with a different type of emergency in mind.

Therefore, in order to ensure your community’s, by now likely revised and lessened, coronavirus rules and regulations remain valid and enforceable, it is important to review the basics. Board members have a fiduciary duty to their association members. That duty supports board-promulgated rules that promote the health, happiness, and peace of mind of the majority of the members. Thus, rules can be adopted for different reasons. At times, a rule may be necessary under the circumstances. For example, say the local health department issues a special bulletin regarding a significant rise in coronavirus within a very limited geographic region in which an association has membership consisting of aged members. Likely, that association may reasonably adopt more stringent rules than an association located in an area with very few cases.

Clearly, if an association is going to restrict vendor and guest access or the rights of the members to use amenities that they otherwise have a lawful right to use, then the board better be able to create the necessary nexus between the situation at hand and rule at issue.

Rules Must Be Reasonable

In Hidden Harbour Estates v. Norman, 309 So. 2d 180 (Fla 4th DCA 1975), unit owners challenged a board-adopted rule prohibiting the use of alcoholic beverages in certain areas of the common elements of the condominium. The trial court found the rule invalid, holding that rules must have some reasonable relationship to the protection of life, property, or the general welfare of the residents of the condominium to be valid and enforceable. The Fourth District Court of Appeal, however, held that the rule was valid because the rule was reasonable. The Court explained that there is a principle “inherent to the condominium concept” that each unit owner must give up a certain degree of freedom in a condominium in order to promote the health, happiness, and peace of mind of the majority of unit owners. The Court concluded that the test for the validity of a rule is reasonableness. An association is not permitted to adopt arbitrary or capricious rules that do not relate to the health, happiness, and enjoyment of the unit owners. However, if a rule is reasonable, the association is permitted to adopt it.

Rule Validity

In Hidden Harbour Estates v. Basso, 393 So. 2d 637 (Fla 4th DCA 1981), the association sought to enjoin unit owners from maintaining a shallow well on their property. The Fourth District Court of Appeal noted that there are two categories of use restrictions: (i) use restrictions set out in the declaration of condominium and (ii) rules adopted by the board or the refusal of the board to allow a certain use when the board has the authority to grant or deny such use. The Court concluded that use restrictions set out in the declaration are “clothed with a very strong presumption of validity” because unit owners purchase their unit knowing of and accepting the restrictions to be imposed. However, rules adopted by the board do not enjoy the strong presumption of validity and must be “reasonably related to the promotion of the health, happiness, and peace of mind of the unit owners.” In this case, the board articulated three reasons for refusing to allow the unit owners to install a well on their property. However, the Court held that the there was no evidence to support the association’s articulated reasons for denial, and therefore the association failed to demonstrate a reasonable relationship between the denial of the application and the objectives which the association argued the denial would achieve. Because the board’s denial was not reasonable, it was held invalid.

Rules Cannot Contravene Declaration or Rights Inferable Therefrom

In Beachwood Villas Condominium v. Poor, 448 So. 2d 1143 (Fla 4th DCA 1984), unit owners challenged two rules adopted by the board of directors of the association which regulated unit rentals and the occupancy of units by guests during the owner’s absence. The trial court held that the rules were invalid because they exceeded the scope of the board’s authority. However, the Fourth District Court of Appeal reversed the trial court and held that the rules were within the scope of the board’s authority. The Court looked to the decision in Hidden Harbour v. Basso, and the two sources of use restrictions: those set out in the declaration of condominium and those adopted by the board. The Court noted that board-adopted rules are reviewed first by determining whether the board acted within the scope of its authority and second, whether the rule reflects reasoned or arbitrary and capricious decision-making.

The Court determined that a board-adopted rule that does not contravene either an express provision of the declaration or a right reasonably inferable therefrom will be found valid. In other words, if the board has the authority to adopt the rule, and the rule does not conflict with the declaration or any right reasonably inferable from the declaration, the board is acting within the scope of its authority to adopt the rule. In this case, the unit owners did not challenge the reasonableness of the rules, so the Court ended its analysis with the question of the board’s authority to adopt the rule and did not move on to the reasonableness considerations discussed in Hidden Harbor v. Basso. As the rules adopted by the board did not contravene either an express provision of the declaration or any right inferable therefrom, the Court held that the rules were within the scope of the board’s authority, and were, therefore, valid.

Remember, when the board publishes an agenda which provides rules will be considered for adoption, that if the rule governs a member’s use of their property or unit then it requires a 14-day notice to all members. The notice must also be posted conspicuously on the property 14 days in advance of the meeting. Rules affecting the common area and common elements only require the typical 48- hour board meeting notice. Of course, your community’s governing documents may also have requirements regarding rule adoption, and if so, they likely should be adhered to as well. After board adoption the rules need to be sent out to the entire community. In addition, homeowners’ association rules should be recorded in the county’s official records, too.

It is a given that as society progresses to normal, rules that were needed yesterday can become outdated today. Be sure to be in touch with your association’s lawyer regarding the continuation of any previously adopted coronavirus restrictions and any proposed new rules prior to board adoption to help ensure their continued enforceability.

(Reprinted with permission from the December 2020 edition of the Florida Community Association Journal)

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Approval Needed—Material Alterations

Why Condominium Associations Must Obtain Approval Before Work Begins and A Plea To The Florida Legislature For A Remedy

When it comes to material alterations, some might say that homeowner associations have it easy compared to condominium associations. For a homeowners association, because Chapter 720, Florida Statutes is silent on the issue, unless otherwise provided in the governing documents, decisions regarding material alterations are made by the board. But, as to condominium associations, and as their board members should know, §718.113(2), Florida Statutes, requires advance membership approval for material alterations to the common elements and association real property. In this regard, there is no parity between the Condominium Act versus the Homeowners Association Act.

Before explaining further, a reminder of the Florida’s Fourth District Court of Appeal  definition of what constitutes a “material alteration” from the seminal case Sterling Village Condominium, Inc. v. Breitenbach,  251 so.2d 685, 4th DCA (1971) is in order. As explained in Sterling,  “as applied to buildings the term ‘material alteration or addition’ means to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance.”

Prior to July 1, 2018, §718.113(2)(a), Florida Statutes, provided that no material alteration or substantial addition can be made to the common elements or association real property without the approval in the manner provided for in the declaration, or if the declaration is silent, then by 75 percent of the total voting interests of the association. As adopted by the 2018 Florida legislature, (effective July, 1, 2018), §718.113(2), Florida Statutes was amended to provide that approval of the material alteration or substantial addition must be obtained before the work commences.

The current language of §718.113(2)(a), Florida Statutes, provides as follows:

Except as otherwise provided in this section, there shall be no material alteration or substantial additions to the common elements or to real property which is association property, except in a manner provided in the declaration as originally recorded or as amended under the procedures provided therein. If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions before the material alterations or substantial additions are commenced. This paragraph is intended to clarify existing law and applies to associations existing on July 1, 2018. [Emphasis added]

Prior to the 2018 amendment, §718.113(2), Florida Statutes, did not expressly provide that the approval must be obtained before the material alteration or substantial addition was commenced. However, in a recent decision by the Third District Court of Appeal, the Court held that approval was required before the material alteration or substantial additions were commenced even before the language of §718.113(2), Florida Statutes, was amended to include the advance approval requirement!

In Bailey v. Shelborne Ocean Beach Hotel Condominium Association, Inc., Nos. 3D17-559, 3D17-01767 (Fla. 3d DCA July 15, 2020), unit owners brought a claim against their association alleging that the association violated §718.113(2), Florida Statutes, by failing to obtain the approval of the membership before commencing a large construction project which, they argued, constituted a material alteration to the common elements. Later, both parties agreed that all but two of the alleged “material alterations” actually constituted necessary maintenance that the association was authorized to commence without a vote of the membership.

The association alleged that the remaining two construction items were also necessary maintenance, which was an allegation the unit owners disputed. The trial court held that the remaining two alleged material alterations were valid notwithstanding whether they were necessary maintenance or material alterations because the association eventually obtained the approval of the membership (presumably after the fact). Therefore, the trial court reasoned it did not need to make a determination as to whether the two items were material alterations since the membership approved them, albeit in a tardy fashion.

On appeal to the Third District Court of Appeal, the unit owners challenged the trial court’s decision arguing that the statute required the association to obtain approval for material alterations before it commenced the work. Therefore, the plaintiff unit owners argued that the membership could not provide their consent and approval posthumously. As the construction project at issue took place between 2010 and 2016, the applicable version of §718.113(2) did not include the express requirement that approval be obtained before material alterations are commenced. However, the Court still held that the portions of a construction project that do not constitute necessary maintenance must be approved prior to commencement.

The court explained that “based on the structure of the statute, the 75 percent approval requirement is a condition necessary to overcome the statute’s clear prohibition, insofar as any of the construction work amounts to material alteration or substantial additions.” However, because the trial court did not rule on whether the two items at issue were material alterations or necessary maintenance, the Court was unable to determine whether a vote of the members was pre-required and remanded the case to the trial court for further proceeding to determine the nature of the two construction items.

Because the Court did not make a final determination whether the two construction items constituted necessary maintenance, the Court did not address the remedy for the association’s failure to obtain the advance approval of the membership. Additionally, the law fails to address the remedy when an association does not obtain membership approval before commencing a project.

In cases of material alterations already completed which required the advance approval of the membership, the present version of §718.113(2), Florida Statutes leaves no room whatsoever for the court to order an association to posthumously acquire the membership vote or put things back the way they were. Rather, the only remedy that appears available to the court would be to restore the common elements to its pre-existing state (or as close as can be accomplished under the circumstances), which explains why a legislative fix to §718.113(2), Florida Statutes, to provide for additional remedy would be helpful.

There is a very important lesson to be gleaned from the Bailey case. If your association is considering a material alteration of any kind, then the association would be wise to attain the required approval before commencing the project to avoid a successful legal challenge. If the association fails to obtain the required approvals before commencement of the project, in the event of a legal challenge, the association may well be required to undo whatever alterations were made to the common elements as Bailey suggests this was the case even before the relevant statute was amended. This can result in significant expense to the association, not to mention having to explain what happened to many irate unit owners.

Remember, prior to commencing any material alteration or substantial addition, be sure to consult your association’s attorney to ensure you comply with the requirements of the Florida law and your association’s governing documents.

(Reprinted with permission from the November 2020 edition of the Florida Community Association Journal.)

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2020 Florida Constitutional Amendments

What You Need To Know Before Voting

When voters go to the polls on November 3, 2020, there will be six constitutional amendment proposals on the ballot. This article contains a brief discussion of the amendments. In order to adopt each amendment, it must be approved by 60% of voters casting a ballot. We take no position on any of the amendments, and simply wish to provide our readers with a summary of each proposed amendment. The ballot title and summary of each amendment, as same will be listed on the ballot, is provided, and a brief explanation follows.

Amendment 1: Citizenship Requirement to Vote in Florida Elections

This amendment provides that only United States Citizens who are at least eighteen years of age, a permanent resident of Florida, and registered to vote, as provided by law, shall be qualified to vote in a Florida election. Because the proposed amendment is not expected to result in any changes to the voter registration process in Florida, it will have no impact on state or local government costs or revenue. Further, it will have no effect on the state’s economy.

Discussion:

Amendment 1 amends the language of Article VI of the Florida Constitution. Currently, Article VI provides that “Every citizen of the United States who is at least eighteen years of age and who is a permanent resident of the state, if registered as provided by law, shall be an elector of the county where registered.” This amendment revises the language of Article VI to provide that “Only a citizen of the United States…” can vote. As currently drafted, the language of Article VI bars non-citizens from voting.

  • Proponents argue that the language change is necessary to clarify who is not permitted to vote, and to stimy any efforts to give voting rights to non-citizens in local elections.
  • Opponents argue that the amendment is unnecessary as the language of Article VI of the Florida Constitution already limits voting to citizens.

Amendment 2: Raising Florida’s Minimum Wage

Raises minimum wage to $10.00 per hour effective September 30th, 2021. Each September 30th thereafter, minimum wage shall increase by $1.00 per hour until the minimum wage reaches $15.00 per hour on September 30th, 2026. From that point forward, future minimum wage increases shall revert to being adjusted annually for inflation starting September 30th, 2027. State and local government costs will increase to comply with the new minimum wage levels. Additional annual wage costs will be approximately $16 million in 2022, increasing to about $540 million in 2027 and thereafter. Government actions to mitigate these costs are unlikely to produce material savings. Other government costs and revenue impacts, both positive and negative, are not quantifiable.

THIS PROPOSED CONSTITUTIONAL AMENDMENT IS ESTIMATED TO HAVE A NET NEGATIVE IMPACT ON THE STATE BUDGET. THIS IMPACT MAY RESULT IN HIGHER TAXES OR A LOSS OF GOVERNMENT SERVICES IN ORDER TO MAINTAIN A BALANCED STATE BUDGET AS REQUIRED BY THE CONSTITUTION.

Discussion:

Amendment 2 would increase Florida’s minimum wage to $15.00 per hour by September 2026. Currently, Florida’s minimum wage is $8.56 per hour. The amendment proposes to increase the minimum wage to $10.00 per hour in September 2021 with an increase of $1.00 per hour each year until the minimum wage becomes $15.00 per hour in September 2026. Thereafter, the minimum wage will be adjusted annually for inflation.

  • Proponents argue that the increased minimum wage will allow minimum wage workers to earn enough to afford basic household necessities, and help to reduce race and gender income inequality. They also point to a potential increase in economic activity by increased household spending.
  • Opponents argue that an increase in labor costs would likely be passed on to the customers which would lead to an increase in the cost of living. They argue that a minimum wage increase would impact state and local governments with increased wage costs of $16 million in 20212 and $540 million in 2027. They point to a 2019 Congressional Budget Office analysis looking at the potential impact of raising the federal minimum wage which predicted a .8% drop in employment and reduced business income.

Amendment 3: All Voters Vote in Primary Elections for State Legislature, Governor, and Cabinet

Allows all registered voters to vote in primaries for state legislature, governor, and cabinet regardless of political party affiliation. All candidates for an office, including party nominated candidates, appear on the same primary ballot. Two highest vote getters advance to general election. If only two candidates qualify, no primary is held and winner is determined in general election. Candidate’s party affiliation may appear on ballot as provided by law. Effective January 1, 2024. It is probable that the proposed amendment will result in additional local government costs to conduct elections in Florida. The Financial Impact Estimating Conference projects that the combined costs across counties will range from $5.2 million to $5.8 million for each of the first three election cycles occurring in even-numbered years after the amendment’s effective date, with the costs for each of the intervening years dropping to less than $450,000. With respect to state costs for oversight, the additional costs for administering elections are expected to be minimal. Further, there are no revenues linked to voting in Florida. Since there is no impact on state costs or revenues, there will be no impact on the state’s budget. While the proposed amendment will result in an increase in local expenditures, this change is expected to be below the threshold that would produce a statewide economic impact.

Discussion:

Currently, Florida is a closed primary state, meaning that voters can only vote in the primary of the party with which they are affiliated. Amendment 3 would replace closed primaries with open primaries for the following elections: Governor, State Cabinet, and Florida Legislature. In an open primary all voters vote for all candidates on a single ballot. The top two vote getters, regardless of party affiliation, would advance to the general election. This change would only apply to the enumerated elections, and would not apply to local or federal races.

  • Proponents argue that open primaries would help increase voter participation by allowing registered voters not affiliated with a major political party to participate in primary elections. They also argue it could help produce more competitive races and attract more moderate candidate to run for state offices.
  • Opponents argue that open primaries could result in two members of a major political party being on the general ballot. Additionally, opponents argue that closed primaries ensure that candidates conform more closely and consistently with positions held by the two major political parties.

Amendment 4: Voter Approval of Constitutional Amendments

Requires all proposed amendments or revisions to the State Constitution to be approved by the voters in two elections, instead of one, in order to take effect. The proposal applies the current thresholds for passage to each of the two elections. It is probable that the proposed amendment will result in additional state and local government costs to conduct elections in Florida. Overall, these costs will vary from election cycle to election cycle depending on the unique circumstances of each ballot and cannot be estimated at this time. The key factors determining cost include the number of amendments appearing for the second time on each ballot and the length of those amendments. Since the maximum state cost is likely less than $1 million per cycle but the impact cannot be discretely quantified, the change to the state’s budget is unknown. Similarly, the economic impact cannot be modelled, although the spending increase is expected to be below the threshold that would produce a statewide economic impact. Because there are no revenues linked to voting in Florida, there will be no impact on government taxes or fees.

THE FINANCIAL IMPACT OF THIS AMENDMENT CANNOT BE DETERMINED DUE TO AMBIGUITIES AND UNCERTAINTIES SURROUNDING THE AMENDMENT’S IMPACT.

Discussion:

Amendment 4 would change the requirements to approve a constitutional amendment. Currently, a constitutional amendment is adopted if it is approved by 60% of the voters casting a ballot. Amendment 4 would require an amendment to be approved by at least 60% of the voters in two consecutive election cycles. In other words, a proposed amendment would have to be approved twice.

  • Proponents argue that requiring double approval would limit “legislating” by constitutional amendment by making it harder to adopt amendments to the Florida Constitution.
  • Opponents argue that it will limit voters’ ability to amend the constitution and to act as a check on the Florida Legislature when it fails to pass laws that are important to citizens.

Amendment 5: Limitations on Homestead Property Tax Assessments; increase portability period to transfer accrued benefit

Proposing an amendment to the State Constitution, effective January 1, 2021, to increase, from 2 years to 3 years, the period of time during which accrued Save-Our-Homes benefits may be transferred from a prior homestead to a new homestead.

Discussion:

Amendment 5 increases the amount of time property owners have to transfer the “Save Our Homes” property tax exemption when they move. Currently, property owners have two years to transfer their tax exemption when they move. Amendment 5 would extend that to three years effective January 1, 2021.

  • Proponents argue that, as the tax year starts on January 1, owners who sell later in the year end up with less time to transfer their tax benefit than owners who sell earlier in the year. They argue that extending the exemption to three years allows more Floridians to take advantage of the transfer.
  • Opponents argue that the amendment would reduce local property taxes, including a reduction of $1.8 million in fiscal year 2021-2022.

Amendment 6: Ad Velorem Tax Discount for Spouses of Certain Deceased Veterans Who Had Permanent, Combat-Related Disabilities

Provides that the homestead property tax discount for certain veterans with permanent combat-related disabilities carries over to such veteran’s surviving spouse who holds legal or beneficial title to, and who permanently resides on, the homestead property, until he or she remarries or sells or otherwise disposes of the property. The discount may be transferred to a new homestead property of the surviving spouse under certain conditions. The amendment takes effect January 1, 2021.

Discussion:

Under current law, honorably discharged, combat disabled veterans who are over 65 are eligible for a homestead property tax discount. However, the discount expires upon the death of the veteran. Amendment 6 would allow the homestead property discount to be transferred to the veteran’s surviving spouse who is on the title and lives in the home.

  • Proponents argue that the amendment would extend additional tax relief to assist surviving spouses who often live on fixed incomes.
  • Opponents argue that the tax discount will lead to a reduction in tax revenue including a reduction in school tax revenue by $1.6 million annually and non-school property tax revenue by $2.4 million annually.

A special Thank You to attorney Olivia Cato of our firm for preparing this article

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Political Events & Political Yard Signs | Prohibitions and Enforcement

Can a Florida community association adopt rules prohibiting use of the clubhouse for political events? Generally speaking, the board can adopt such a rule, but there are statutory exceptions which provide for the right of the members to peaceably assemble and which allow for the invitation of public officers and candidates for public office to speak in common areas. More specifically, §720.304(1), Fla. Stat. (i.e., the Homeowners Association Act), provides the following:

All common areas and recreational facilities serving any homeowners association shall be available to parcel owners in the homeowners association served thereby and their invited guests for the use intended for such common areas and recreational facilities. The entity or entities responsible for the operation of the common areas and recreational facilities may adopt reasonable rules and regulations pertaining to the use of such common areas and recreational facilities. No entity or entities shall unreasonably restrict any parcel owner’s right to peaceably assemble or right to invite public officers or candidates for public office to appear and speak in common areas and recreational facilities.

Similar provisions exist in both the Condominium and Cooperative Acts in §718.123 and §719.109, Fla. Stat., respectively.

With these statutory rights in mind, should an association member invite a candidate for political office to speak, the association must allow use of the clubhouse or other common area for the candidate to address the members. If members peaceably assemble and discuss today’s political events, that, too, seems to be a statutory protected right. However, if a political group requests use of the clubhouse to host an event in support of a candidate or political party, then it likely could be prohibited except that the candidate would still be permitted to speak and every association member would be allowed to attend, even those who may desire to protest.

If a rule adopted by the association prohibits the use of the clubhouse for political events and if legally challenged by an upset member, while it is difficult to predict the outcome, the court will need to balance the reasonableness of the board’s adopted rule as compared against the statutory protection. It should also be kept in mind that, if your association was created prior to the legislation protecting a political candidate’s right to speak, and the declaration does not contain a provision adopting the legislation through “Kaufman” type language (meaning it’s as if the legislation was adopted into the declaration), then such an association has an argument that such substantive legislation does not apply. (These rights came into existence on the following dates: October 1, 1977, for condominiums and cooperatives and April 1, 1992, for homeowners associations.)

Association rules governing and even completely prohibiting political signs are a different matter. Let’s face it, unless you share similar political views, your neighbor’s front yard sign supporting a favorite political candidate may be upsetting. Can a Florida association demand the sign’s removal? Well, not if the association has not yet adopted rules governing signage in the community.

A well-crafted and properly adopted board rule prohibiting all signs, as compared to just prohibiting political signs, is likely enforceable with this caveat. Section 720.304 of the Homeowners Association Act provides that any parcel owner may display a sign of reasonable size provided by a contractor for security services within 10 feet of any entrance to the home. In examining an association’s “no sign” rule, let us first address the argument heard every four years, “This is America! The First Amendment protects the right of all homeowners to display political signs.” Wishing this to be true will not help. In fact, the First Amendment concepts of freedom of speech and freedom of expression certainly apply to government settings. But, where the application of the United States Constitution First Amendment begins and ends as applied to Florida’s community associations is anything but clear. As such, the First Amendment could act as both a shield and a sword.

Community associations are not governmental; though admittedly they govern, they have no nexus to local or federal government. In 1987, the Florida Supreme Court held, in Quail Creek POA v. Hunter, 538 So. 2d 1288 (Fla. 2d DCA 1989), that neither a homeowners association’s recording of its covenants in the public records nor the enforcement of its covenants in state court created a sufficient nexus to evidence “state action” such that the First and Fourteenth Amendment would apply. With that in mind, any homeowner would be hard pressed to argue otherwise. But, should an association adopt a rule prohibiting one type of sign but allowing other types of signs, then notwithstanding the arguments that the First Amendment does not apply to community associations, this creates an argument that the association is regulating the type and manner of speech and thus, might, inadvertently be leaving room for a First Amendment type argument to be used against the association.

Courts have long since held that owners give up certain liberties when living in a community association. In 2002, the Florida Supreme Court held, in Woodside Village v. Jahren, 806 So. 2d 452 (Fla. 2002), that certain individual rights must be compromised when one chooses to live in a condominium association.

With that as our backdrop, any “no-sign” rule should be artfully drafted to help ensure enforceability. There is no margin for error. The dispositive court cases regarding rule enforceability make clear that a sign restriction must be “clear and unambiguous” to be enforceable against an owner. Remember, a basic principal of contract interpretation is that ambiguous terms are held against the drafting party. As a practical matter, in plain English this means that in the event the rule is even slightly confusing, the homeowner will receive the benefit of the doubt. Also, any covenant or rule must be applied fairly to avoid selective enforcement rebuttals; so, if Dorothy the Democrat is told to remove her lawn sign, so, too, must Roger the Republican be similarly told. Remember, too, that as a general rule, courts favor covenants adopted by the membership over rules adopted by the board; meaning, the former serves to increase the association’s chances of prevailing.

That rules prohibiting signs must be artfully drafted was a point made very clear to the homeowners association in Shields v. Andros Isle Property Owners Association, Inc., 872 So. 2d 1003 (Fla. 4th DCA 2004), in which the Fourth District Court of Appeal of Florida decided in favor of the homeowner who displayed a sign in her car window despite the association’s sign prohibition. The association’s rules prohibited the display of signs “on any lot”, except a “for sale” sign of a certain size, and prohibited signs on a vehicle. The Court, using the definition of a “lot” in the association’s declaration, interpreted these rules to mean that no sign, except a “for sale” sign, may be on the land or on the exterior of a vehicle. However, there was no prohibition for signs displayed from within a vehicle. When ambiguity exists, courts will rule in favor of the non-drafting party. In this instance the association is deemed the drafter of the rule, so therefore the ambiguity was held against the association, which worked to the owner’s benefit.

Consider, too, election season is short. By the time a lawsuit for an injunction to enforce the “no-sign” covenant is fully resolved, it might be time to consider the next presidential candidate! Please be sure to consult with your association’s attorney when considering new or modifying existing rules and regulations.

(Reprinted with permission from the October 2020 edition of the Florida Community Association Journal.)