board member | Rembaum's Association Roundup

May 2, 2024May 2, 2024

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

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

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

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

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

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

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

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

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

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

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

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

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

March 11, 2024March 11, 2024

Dos and Don’ts of Election Challenges

Dos and Don'ts of Election Challenges in Community Associations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

March 3, 2024March 11, 2024

Revised | Corporate Transparency Act Found Unconstitutional

CORPORATE TRANSPARENCY ACT REGISTRATION STILL REQUIRED

If It Is Too Good To Be True, It Probably Is

Earlier this week Rembaum’s Association Roundup reported that the Corporate Transparency Act (the “CTA”) appeared dead on arrival due to the holding in The National Small Business United, d/b/a the National Small Business Association, et al v. Janet Yellen, in her official capacity as Secretary of the Treasury, et al., Case No. 5:22-cv-1448-LCB, United States, District Court, Northern District of Alabama, Northeastern Division entered on March 1, 2024. However, unknown at the time of publication was that the Court also entered a three sentence Final Order which made clear the CTA was ONLY unconstitutional as applied against the Plaintiffs in the aforesaid case. Therefore, whether the CTA will be later found unconstitutional against all corporate entitles in the United States remains to be seen. With this in mind, at least as of today, it would appear that all community associations are still required to comply with the disclosure requirements of the CTA by December 31, 2024. Please be sure to check with your attorney no later than the beginning of the fourth-quarter of this year, 2024, as to whether compliance is still required. If so, because of the significant civil and criminal penalties for noncompliance, be sure to do so. Of course, as additional information comes to our attention, we will pass it along to our readers.

The prior article is as follows:

THE CORPORATE TRANSPARENCY ACT FOUND UNCONSTITUTIONAL

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

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

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

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

While this is just the beginning of the CTA appellate fight, and no doubt the government will appeal to the 11^th Circuit Court of Appeals, and then the loser of that challenge will likely appeal to the United States Supreme Court, at least for now the CTA’s registration requirements due by December 31, 2024, are dead on arrival as to the Plaintiffs in the aforesaid case, only. Whether the holding will be later broadened to include all other corporate entities is unknown at this time.

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

February 6, 2024February 6, 2024

Civility in Community Associations | Does It Even Exist Anymore?

Civility in Community Associations: Does it Even Exist Anymore?

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

Most declarations have a nuisance provision similar to the following:

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

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

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

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

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

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

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

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

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

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

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

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

January 4, 2024January 4, 2024

The Transparency Act and Community Associations

THE FEDERAL CORPORATE TRANSPARENCY ACT REQUIREMENTS AFFECTING ALL COMMUNITY ASSOCIATIONS

What Every Board Member and Manager Must Know

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

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

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

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

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

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

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

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

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

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

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

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

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

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

October 3, 2023October 3, 2023

Board Member Certification

Board Member Certification: Should It Be Just The Beginning?

The Florida legislature requires board members to be “certified” in order to be properly qualified to serve on the board of a residential community association. By now you might think that the requirements are exactly the same for condominium boards as compared against homeowner associations’ boards, but they differ with regard to how long the association is obligated to keep the proof of director certification.

The Florida Condominium Act, more specifically §718.112(2)(d)4.b., Florida Statutes, and the Florida Homeowners’ Association Act, more specifically §720.3033(1)(a), Florida Statutes, require the following:

Within 90 days after being elected or appointed to the board of an association of a residential condominium, each newly elected or appointed director shall certify in writing to the secretary of the association that he or she has read the association’s declaration of condominium, articles of incorporation, bylaws, and current written policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members.
In lieu of this written certification, within 90 days after being elected or appointed to the board, the newly elected or appointed director may submit a certificate of having satisfactorily completed the educational curriculum administered by a division-approved condominium education provider within one year before, or 90 days after the date of election or appointment.
The written certification or educational certificate is valid and does not have to be resubmitted as long as the director serves on the board without interruption.
A director of an association who fails to timely file the written certification or educational certificate is suspended from service on the board until he or she complies with this sub-subparagraph. The board may temporarily fill the vacancy during the period of suspension.
Failure to have such written certification or educational certificate on file does not affect the validity of any board action.
The Condominium Act requires that the secretary shall cause the association to retain a director’s written certification or educational certificate for inspection by the members for five years after a director’s election or the duration of the director’s uninterrupted tenure, whichever is longer, while the Homeowners’ Association Act requires that the association retain each director’s written certification or educational certificate for inspection by the members for five years after the director’s election.

While requiring certification is a good start in regard to providing board members the necessary tools to do their job, there are issues which need to be addressed, such as the following:

The ability of a board member to be certified simply by signing an 8 ½ x 11 piece of paper that they read the governing documents, will uphold the governing documents, and will faithfully discharge their duty should be eliminated. How many board members actually read their respective governing documents; and even if they do, what did they learn about corporate governance and the ever-growing body of statutory law, judicial decisions, and intricacies of ensuring that their fiduciary responsibility is being met?
The ability to be certified simply by watching a pre-recorded webinar should also be modified or, better still, fully eliminated. Not only do attendees benefit from the one-on-one instruction in a live classroom or webinar setting, but when viewers have the ability to watch from home, well, did they really do so? At present the Department of Business and Professional Regulation (DBPR) does not regulate or police the pre-recorded board certification webinar. These pre-recorded certification courses allow the viewer to cheat the system by simply fast forwarding to the end to make it appear as though the viewer watched the entire presentation, but in reality, they did not! Most importantly, the laws governing community associations are in a constant state of flux. The legislature is continually revising and adding new laws, and appellate courts continually author new opinions affecting community associations. Only by attending a live class, be it in person or by webinar, will a board member have the best opportunity to be fully updated.
The information covered in the certification class is primarily of a legal nature emanating from the Florida Statutes and relevant case law. Therefore, only lawyers who are board-certified specialists in this body of law and other lawyers with a sufficient number of years of daily experience in community association law matters should be permitted to teach the initial board certification classes.
Continuing education for those board members serving multiple years should be strongly considered, even if it is only one or two hours per year. The continuing education component courses could be led by board-certified specialists in this body of law, or by other lawyers with a sufficient number of years of daily experience in community association law matters, or perhaps even experienced, licensed managers demonstrating sufficient knowledge in the field, regarding a variety of subjects. Also, during the typical initial board member certification course, the variety of subjects needing discussion can only be summarized. Therefore, in-depth analysis of the myriad of issues and subjects discussed is practically impossible given the time constraints, which could be addressed by requiring continuing education. Potential subjects include the following:

- - Contract pitfalls
  - Budgets and reserves
  - Internal controls
  - Elections
  - Conflicts of interest
  - Approval and screening requirements
  - Fair housing laws
  - Covenant enforcement
  - How to run a board meeting
  - Conflict resolution and de-escalation techniques for angry homeowners.

Requiring an initial board certification was a really good start. However, the process of education must continue. In our opinion, a one-time board certification course is simply not sufficient! Since the law already contemplates that board members will serve multiple years, the law should also contemplate continuing education requirements.

(Written by Jeffrey Rembaum (Kaye Bender Rebaum) and reprinted with permission from the October 2023 edition of the “Florida Community Association Journal“.)