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

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Tag: homeowners’ associations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There are others, too.

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

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

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

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

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

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

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

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2024 Legislative Clarifications for Board Members and Managers – An Update

2024 Legislative Clarifications For Board Members and Managers

The purpose of this article is to address the following:

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

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

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

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

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

HURRICANE PROTECTION REQUIREMENTS:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Kaye Bender Rembaum, P.L.