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Article
Courtesy of JD SUPRA
By Sarah Carpenter + Kevin Koushel
Published May 17, 2026
Over the past four years, Florida’s condominium and
homeowners’ association (“HOA”) statutes have experienced significant
changes. Many were spurred by the collapse of Champlain Towers South; others
were in response to different events that similarly portrayed community
associations in a negative light (e.g., the fraud investigation involving
The Hammocks). Whatever the cause, the recent trend has been more
regulation, especially in the areas of building safety, fiscal
responsibility, and community governance.
The 2026 Florida Legislative Session was tracking in the same direction,
with another ambitious slate of proposals headlined by House Bill 657 (“HB
657”). When the regular session ended on March 13, 2026, however, all the
notable condominium and HOA bills (including HB 657) had stalled, signaling
a shift from the usual approach to “let’s wait and see.”
But this “vacation” was short-lived, as Fannie Mae and Freddie Mac
coincidentally updated their project standards for condominiums and HOAs
five days later. The new lender guidelines are designed to promote financial
resilience and long-term sustainability of these projects. In Florida,
however, the updates may do more harm than good given the relatively new
State regulations now in place. Only time will tell what additional impact
Fannie Mae and Freddie Mac’s actions will have.
Finally, a concerted effort is underway to revise Section 718.117(2),
Florida Statutes, governing condominium termination because of economic
waste or impossibility. Once perceived as a developer-driven initiative, the
proposal has started to gain broader support (or at least acquiescence), as
cases such as Biscayne 21 illustrate the need for a uniform statutory
off-ramp for condominiums near the end of their useful life.
HB 657
This year’s failed legislation ranged from small tweaks to another sweeping
proposal with many far-reaching implications. The best example of the latter
was HB 657, known as the Homeowners’ Association Dissolution and
Accountability Act. Of all the substantive proposals within HB 657, two
concepts are worth highlighting, as they could resurface in the years to
come: (1) HOA termination; and (2) mandatory Kaufman language.
HB 657 established a framework for terminating HOAs pursuant to a plan of
termination that could be initiated by as little as 20% of the voting
interest in the HOA and approved by two-thirds of the members. Unlike a
condominium, an HOA’s common areas are typically owned by the HOA itself,
and the HOA’s declaration provides the authority to levy assessments for the
operation and maintenance of those common areas. Termination of the HOA
would therefore not only extinguish the covenants and restrictions
encumbering the lots within the community, but also leave the common areas
without any funding mechanism to ensure their long-term upkeep. The proposed
termination procedure may have also conflicted with local zoning laws, which
in some jurisdictions require certain residential developments to be
governed by an HOA.
HB 657 also included a provision mandating the use of so-called “Kaufman
language.” Kaufman language refers to a condominium’s submission to the
Florida Condominium Act (the “Act”), as amended from time to time, the
effect of which is to automatically incorporate future amendments to the Act
into the respective declaration of condominium. In the absence of Kaufman
language, a condominium remains subject to the Act as in effect on the date
its declaration was recorded in the public records.
Accordingly, HB 657 would have required (i) all newly created condominiums
to incorporate Kaufman language in their declarations and (ii) all existing
condominiums to convene a membership meeting to vote on a corresponding
amendment to their declarations. While the apparent intent was to establish
a uniform regulatory framework for all condominiums in Florida, the bill
would have achieved that objective only on a prospective basis, and the
provision applicable to existing condominiums lacked any practical mechanism
for enforcement or implementation.
Fannie Mae and Freddie Mac Updates
On March 18, 2026, Fannie Mae and Freddie Mac, in coordination with the
Federal Housing Finance Agency, concurrently issued significant updates to
their condominium and HOA project eligibility standards through Fannie Mae’s
Lender Letter LL-2026-032 and Freddie Mac’s Bulletin 2026-C. These updates
are expected to have a direct and material impact on residential financing
and homeownership in South Florida.
The most consequential change is the increase in the required reserve
allocation from 10% to 15% of total annual budgeted assessment income,
effective January 4, 2027. Many associations are not currently satisfying
even the prior 10% threshold, and industry observers anticipate that the
heightened 15% requirement will compel higher assessments and more rigorous
long-term financial planning. An association that does not meet the 15%
threshold may nonetheless qualify if it has a reserve study completed or
updated within the preceding three years by an independent qualified
professional; however, the association’s budget must fund the highest
recommended reserve allocation identified in such study, rather than a lower
alternative figure. Fannie Mae has also expressly prohibited the so-called
baseline funding method—under which reserve cash balances are permitted to
approach, but not fall below, zero—meaning that budgets calibrated to remain
marginally solvent will no longer be acceptable.
With respect to insurance, the agencies have provided limited relief by
permitting roofs to be insured at actual cash value rather than full
replacement cost and by eliminating the inflation guard requirement. A new
maximum per-unit deductible of $50,000 will, however, take effect on July 1,
2026. In addition, effective August 3, 2026, the “Limited Review” process
for established projects—which has historically accounted for approximately
40% of all project reviews—will be eliminated, such that every transaction
will require either a Full Review or a qualifying Waiver of Project Review.
The 50% investor-concentration cap applicable to established projects under
Full Review has likewise been eliminated, a development that should benefit
urban high-rise and mixed-use projects, and the small-project waiver has
been expanded from 4 units to 10 units.
For South Florida community associations and their boards, the practical
implication is clear: the Fannie Mae and Freddie Mac changes will require
many associations to increase assessments and enhance their long-term
financial planning, compounding the pressure already imposed by Florida’s
recent statutory reforms. Boards that defer budget adjustments until late
2026 will leave homeowners with the least flexibility to absorb the
resulting increases.
Condominium Termination Because of Economic Waste or Impossibility
An effort is currently underway to substantially revise Section 718.117(2),
Florida Statutes, which governs the termination of condominiums because of
economic waste or impossibility. The proposal will likely replace the
current variable voting threshold—tied to the “lowest percentage of voting
interests necessary to amend the declaration”—to a fixed supermajority of
the total voting interests, such as 80%, thereby establishing a predictable,
uniform standard intended to streamline the termination process for aging
buildings. The proposal will also likely introduce a specific cost-to-value
test, under which termination could proceed where the cost of necessary
repairs exceeds a specified percentage of the aggregate fair market value of
all units (less the value of the underlying land), as determined by an
independent licensed engineer or architect and a qualified appraiser. In
addition, the proposal may: (i) carve out impossibility based on land use
laws as a separate, standalone provision; (ii) establish lower voting
thresholds applicable to condominiums with substantial timeshare components;
and (iii) create a judicial petition process under which any unit owner may
seek termination where the improvements have been totally destroyed or
demolished.
The most contested language is likely to be the retroactivity clause—which
would apply to all condominium associations existing after the date of
enactment, irrespective of when the underlying declaration was
recorded—together with the accompanying legislative finding that the statute
“was foreseeable at the time of contracting,” included to preempt potential
takings and impairment-of-contract challenges. The goal is to have the
proposal ready for the Florida Legislature’s consideration in 2027.
Takeaways
All together, these developments indicate that Florida’s condominiums and
HOAs are entering another period of transition. The Legislature’s decision
not to advance any significant condominium- or HOA-related legislation sends
a clear message to those who have not taken prior reforms seriously, and
several of the failed proposals are likely to resurface in modified form in
future sessions. At the same time, Fannie Mae and Freddie Mac’s revised
requirements illustrate how non-legislative regulators can impose immediate
and tangible pressures on Florida associations and homeowners. And as the
State’s condominium inventory continues to age and associations confront the
economic realities of deferred maintenance and rising repair costs, the
effort to establish a workable statutory off-ramp for termination will
command increasing attention and urgency. Developers, lenders, associations,
and homeowners should monitor these converging developments closely, as the
interplay among legislative action, federal lending standards, and
termination reform will shape the regulatory and transactional framework
governing Florida community associations for years to come.
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