How does the passage of HB 1237 affect your condominium association?

I have been in this industry, in one capacity or another, since 1992.  I remember that Florida Statute 718 was virtually re-written around that time.  It was then that the manner in which condominium elections are held was changed to they system we use today.  I recall that when the change came forth, the new regulations were so rigorous that it was frustrating.  However, like anything else, once you get used it, you can’t imagine how life was before it came along.  In 1992, the number of condominium associations in the State of Florida was growing at a fast pace.  Most of the new construction was either a condominium or planned unit development.  As the number of condominium associations increased, so did the need for regulation.  Since then there have been several changes to 718.  In some years, the changes were minor; in other years, such as this year, there were sweeping changes that have had a tremendous impact on our industry. 

This year, House Bill 1237 signed by Governor Rick Scott, is bringing forth more strict guidelines for Board members and CAMs.  To help us break those new guidelines down, we invited Maria V. Arias, Esq. of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars, & Sobel, PA to join us in this week’s podcast of Community Association Matters.   We begin by discussing a new section added to the Florida Statutes, section 718.71, which now requires associations to provide the Department of Business and Professional Regulation (DBPR) with a list of the names of all financial institutions in which each association maintains bank accounts.  A member in the association can request a copy of this list from the DBPR.

The bill, however, mostly made changes to section FS 718.111.  One of the first changes is that the Statute now clarifies what a kickback is and that the guilty party can face criminal charges in addition to civil penalties.  Per Maria, “the emphasis of this bill…has to do with making it clear to directors, officers, vendors, in relation to the association, including the management companies…that you will be exposed to potential civil as well as criminal penalties” if you do not follow the law.

These changes are in response to the recent reports of election fraud and other abuses.  The Florida Legislature felt that it needed to add specific language in FS 718 to clarify that certain acts are criminal.  For example, FS 718.111 now includes language referencing other sections in the Florida Statutes that state that forgery is punishable as a felony.  It specifically includes language that forgery of a ballot envelope or voting certificate constitutes as forgery and it is a felony in the third degree that carries a 5-year prison term and/or a $5,000 fine.  Theft or embezzlement of association funds has always been a crime but again, section 718.111, now specifically has language to emphasize this point; and adds that it is punishable depending on the amounts stolen.  

The Statute now makes it a criminal offense to destroy or refuse to allow the inspection of an official record of the condominium association.  Refusing an owner his right to inspect the official records within the period required by law can also be punishable as a third degree felony.  Maria states that she feels these changes are “intended to place some controls and to let people know that it is serious business; if you want to govern, you are going to have to do it correctly.  And if you don’t do it [correctly] or if you do it [incorrectly then it] leads to criminal charges.”  In this regard, Maria highly recommends that associations consult their attorney for establishing a policy in dealing with records requests.

The Statute also added new requirements as it relates to a Board member’s eligibility to serve on the Board.  It now states that an officer or director charged with a crime referenced in the changes specifically stated in the Statute, presumably related to theft, embezzlement, forgery, destruction of documents, etc., must be removed as a Board member and the vacancy must be filed by electing a new board member, unless the association’s governing documents state otherwise.  According to Maria, most condominium By-Laws require that vacancies be filled by appointment to be done by the remaining directors.    If there is a criminal charge pending against the officer or director, he or she may not be appointed or elected to a position on the board. 

 If the charges are resolved without an adjudication of guilt, then that individual must be reinstated for the remainder of his/her term.  There are several ambiguities with this section of the law.  Maria recommends that condominium associations discuss this provision with their attorney to prepare specific guidelines as to how to implement this at the next Annual and Election Meeting.    She adds that she feels that these changes are intended to ensure that individuals who serve on a Board of Director or who are thinking of joining a board understand that they must perform their duties correctly and consult their attorney if there is a doubt.

The Statute further prohibits an association from hiring an attorney who represents the management company of that association in question.  In addition, it prohibits a board member, manager, or management company from purchasing a unit in foreclosure sale resulting from an association’s foreclosure of its lien.  It also prohibits these parties from taking title by deed in lieu of foreclosure.  Official records now also include bids an association receives for materials, equipment, or services.  Furthermore, renters of a unit are now allowed to inspect and copy the association’s bylaws and rules.

One of the biggest changes from HB 1237 is the requirement that condominium associations that have more than 150 units (excluding time-share units) are now required to have a website by July 1, 2018.  The website must independent and wholly owned and operated by the association; or the website must be operated by a third-party provider.  The association’s website must have the following documents posted:

• The recorded declaration and bylaws, the Articles of Incorporation, and any amendments;
• Rules of the association;
• Management agreements, leases, contracts, and bids;
• Annual budget and proposed budgets to be considered;
• Financial report and any proposed financial report to be considered;
• Director certifications;
• Contracts or documents regarding conflicts of interest or possible conflicts of interest between an association and is directors;
• Unit owner meeting notices and agendas (these must be posted at least 14 days in advance of the meeting, in plain view on the front page of the website, or on a separate subpage labeled “notices” which is conspicuously visible and lined on the front page);
• Documents to be considered and voted on during owners’ meetings and documents listed on the agenda (must be posted at least seven (7) days before the meeting at which the document or information within the document will be considered);
• Board meeting notices, agendas, and materials must be posted in accordance with FS 718.112, which is typically 48 hours in advance of the meeting;

The website must also only be available to owners and employees of the association and cannot be available to the general public.  The association must provide an owner with a user name or password to access the private section of the association’s website.  Maria has a specific concern as it relates to the posting requirements on the website related to members’ meetings and agendas.  In particular, if an association meets all of the mailing requirements under the statute related to special meetings and board meetings but fails to upload the notice on the website as required, is that association not in compliance and required to properly post on the website?  This question cannot be answered now.  She hopes that the Legislature will take corrective action and clarify this point.

The Statute now requires condominium associations with 50 units or less to prepare a report of cash receipts and expenditure.  Lastly, an association, its officer, director, employee, or agent cannot use a debit card issued in the name of the association or billed directly to the association for association expenses.  There are many more changes that will be discussed in the next podcast of Community Association Manners.