WHAT WILL COMMUNITY ASSOCIATION BILL S 1196 REALLY DO?

An Opinion By Jan Bergemann 
President, Cyber Citizens For Justice, Inc. 

Published May 4, 2010

  

The legislative session is finally over. Many citizens can sleep better now since legislators can't do more damage to Florida's citizens by passing bad bills. I have followed the action in Tallahassee for the past 12 years, but I have never seen a session where more outrageous bills were passed. In short: We citizens are dealing with a big mess left by our esteemed elected officials in Tallahassee .

Community associations and their members will have to deal with S1196/H 561. S 1196 ER is the version that will end up on the desk of Governor Charlie Crist. Being an attorney, he will hopefully look through the smoke screen of the so-called reform provisions that actually will not do a lot of good. In my opinion there are a lot more bad provisions in this bill than provisions that might really help.

 

But emotions aside, let's take a look at what these provisions, touted to be the salvation of Florida condominiums, will really do. No emotions, no name-calling -- just the straight facts using the wording of the bill.   

  
Let's start with the provisions for Condos.  

Let's take a look at the specific provisions praised by Donna Berger from CAN, using her statements from her dispatch to CAN members:

  • The amount of past due assessments that condominiums could collect from foreclosing lenders would be doubled from 6 months to 12 months! 

The actual problem is in the wording of the bill: "The liability of a first mortgagee is limited to the lesser of: 12 6 months immediately preceding the acquisition of title or One percent of the original mortgage debt." Example: Mortgage is $200,000; monthly dues $350. One percent of the mortgage is $2,000. Six months of unpaid dues would be $2,100. According to sources, all the bankers were "willing to agree to." My question: Why should homeowners and condo owners pay for the mess created by banks and mortgage companies? Didn't the bankers get the stimulus money that we paid with our tax dollars?

 

Especially many of the older, low-cost condos will not profit from this "reform." There is nothing in the bill that will speed up the foreclosure process. Beware of advice from attorneys to speed up the process by pushing foreclosure from the association's side. You will never recover any of the legal fees that you have to spend to achieve that. (Line 1245 ff.)
  • Condominium boards would be able to suspend the common area use rights and voting rights of delinquent owners subject to notice and hearing requirements. 

No matter what, this provision (for many years allowed in HOAs) will not really put any money in the association coffers. Wasn't increasing revenue the whole idea? Instead this provision allows board members and owners to harass owners who don't/can't pay and may actually help to get rid of some frustration. The bigger danger is in the actual wording: a monetary obligation due to the association  (Line 1507). This allows as well for selective enforcement against "disgruntled" owners. A lot of different things can be a monetary obligation, like a fine, a special assessment, any fee the board sees fit to levy against a specific owner. Example: Board levies a fine against a unit owner who dares to speak up against a proposal pushed by the board. Either the unit owner pays or his clubhouse and/or pool privileges are revoked! Great way to blackmail opponents into shutting up!


  • Troublesome provisions regarding H0-6 individual unit policies (including the requirement that the association be allowed to force place missing policies and that the association be named an additional insured/loss payee) would be removed. 

This is actually what sponsor Representative Ellyn Bogdanoff promised to do since 2008. Bogdanoff was the one who pushed this provision in the first place in her bill H601. That means that she did nothing else but correct the problem she herself had created. Recent court and arbitration rulings more or less force owners to insure their unit anyway. Even if the association (e.g. roof leak) or the neighbor (e.g. washer leak) is causing damage to the property of the owner, only the owner's insurance policy will pay for the damage (absent proof of negligence). Yes, this provision may help, but also it might backfire! (Line 297 ff.)


  • The condominium candidate certification requirements would be clarified to require such form be submitted after an election not before so any confusion as to whom should be included on the ballot would be removed.

The language now allows the already seated, decision-making board member to submit the certificate 90 days after the election. A lot of damage could be done in between. How about creating more confusion? A director who failed to submit the certificate in a timely manner can submit the certificate at a later time and immediately would be reinstated. The director, appointed to fill the empty seat, has to step down! (Line 1024 ff.)


  • Expensive retrofits for sprinklers, elevators and smoke detectors would be delayed and, in certain instances, removed through exemptions or membership approvals.

This is a provision that may save money in the moment for some older buildings, but comes with a high expense of endangering lives, health and safety of the unit owners. A condo fire in Boston last month left four unit owners seriously injured. Quote from fire Chief: "It was an old building with no sprinkler system." Especially endangered: Elderly retirees living in old buildings! As we all know, votes to save money are easy to come by, but once the disaster strikes, the same people will quickly file lawsuits that could be as costly as the retrofit! And nothing has changed in regard to the importance of lives, health and safety since Governor Jeb Bush vetoed H 391 in 2006 and Governor Charlie Crist vetoed S 716 in 2009. See language of veto message: "It poses an unacceptable safety risk, especially to Florida's elderly condominium residents." (Line 1097 ff.)

  • A time-limited bulk buyer provision would encourage investors to purchase abandoned units in failed and floundering communities.

The Distressed Condominium Relief Act allows a bulk buyer to buy units without buying the obligations of a developer. It may -- or may not -- attract bulk buyers; but it carries a very serious risk for the other condo owners that could quickly backfire. A bulk buyer could buy sufficient units to retain the permanent majority on the board, making the other unit owners puppets without any rights. This would create the same chaos as in so-called condo hotels, where the business interest uses association funds to improve its income. Lots of lawsuits speak for themselves.(Line1871 ff.

  •  
    Condominium boards would be able to collect rent from tenants in delinquent units.

The language in this provision (as well added to FS 720) is an open invitation to a legal challenge. The convoluted language makes collection complicated and requires expense of legal fees which are not recoverable. It is doubtful whether it will help -- or will it only create more legal fees? We have a renter’s market in Florida. If a renter feels harassed, he/she will move after not paying rent for two months to recover the security deposit and the association will have another unit not paying dues — and will be stuck with the legal bills. (Line1319 ff.)

These are the provisions that are supposedly helpful and -- according to the sponsors – will create "reforms" and/or "relief."

But there are as well provisions for condos in the bill that are outright bad -- and for that reason they are never mentioned by the proponents of the bill.

How do you like these provisions?

  • Line 744: Exempts: "Personnel records of association employees, including, but not limited to, disciplinary, payroll, health, and insurance records." That means that owners pay for personnel but are not allowed to know how much personnel is being paid.

  • Line 1173: Director or officer delinquencies: Another dictatorial tool that can be used to remove an unwanted director from the board. Board majority makes sure a high fine is levied against this "outspoken" director and the director is told: Either you pay or you are off the board! That can be repeated until this director either gives up or is flat broke. (Line 1173 ff.)

  • Line 1178: "A director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association's funds ...." By information can be interpreted as: Accused by anybody without real proof. You can read in history books where this has been leading to in certain dictatorships. (Line 1178 ff.)

  • Line 1194: Adding more bulk contracts to the list of allowed common expenses. ".. the cost of communications services as defined in chapter 202, information services, or Internet services." This means obligating the paying owners to pay the share of the non-paying owners. This even adds to the problem we see in many communities. (Line 1194 ff.)

Those are the provisions for condos only. The few provisions that may possibly help -- it really has to be seen -- are for condos only. Most of those provisions came from the original bill H561, which could have been a good bill -- if it had been left standing by itself.  Also, original bill H561 needed some changes in regard to the wording that required a bit of trimming. But then H561 was merged with S1196 -- a horrible bill from Day One. The merged bill, merged at a very early stage that left committees no chance to correct obvious mistakes, was confusing and the sheer size of the bill didn't allow any specific discussions during committee meetings. The merger created a bill with 103 pages (2977 lines).  Even most of the co-sponsors didn't really read the merged bill -- and definitely didn't understand it.  When you read media articles about this bill, you always see only the provisions mentioned that the sponsors claim to be helpful. Nobody is talking about the horrible language added to the bill, courtesy of lobbyist Peter Dunbar and the law firm Becker & Poliakoff (CALL).

The language for all the HOA provisions is vague -- on purpose -- and does absolutely nothing to help associations to deal with the financial mess created by unpaid dues and/or foreclosures. The provisions add to the dictatorial powers of association boards, increase the profits of service providers and help bankrupt developers to get rid of their golf curses! No wonder that the sponsors of these provisions are too ashamed to talk publicly about them. According to OPPAGA, about 2.5 million homes in Florida are located within homeowners' associations. That means that about 2.5 million families are affected by HOA laws that nobody enforces or regulates. And considering the provisions the legislators adopted by voting in favor of S1196, it seems like our elected officials don't mind creating mini-dictatorships.

Here are some of the provisions that S1196 creates for HOAs (FS 720):

  • Line 2791: "A fine of less than $1,000 may shall not become a lien against a parcel." This sentence is an insult to every homeowner living in a mandatory homeowners' association in Florida. During the meetings of the HOA Task Force in 2003/2004 we heard lots of testimony from owners with horror stories of bully tactics and blackmail. That's why the lien/foreclosure provision for fines was removed in 2004. This one sentence allows the enforcement of fines levied by association kangaroo courts with liens and foreclosures. It gives dictatorial boards a great tool to shut up opponents who dare to criticize the board and/or manager. Who is the author of this sentence kidding? "less than $1,000"  means that they just have to levy two fines to play the old bullying game. This provision will create even more foreclosures. (Line 2791 ff.)

  • Line 2892: The only provision that is added to FS 720 dealing with the financial crisis is the language "allowing" associations to collect dues from renters living in homes for which maintenance dues are not being paid. The language is the same as in FS 718 -- see above -- and will create exactly the same problems. (Line 2892 ff.)

  • Line 2560: including any reasonable costs involving personnel fees and charges at an hourly rate for vendor or employee time to cover administrative costs to the vendor or association. That makes record requests by owners more expensive. It allows managers to add outrageous costs to the initial $0.50 per page maximum. Requesting five pages of a past board meeting can suddenly cost you $72.50! What happened to TRANSPARENCY?  (Line 2545 ff.)

  • Line 2583: ", including, but not limited to, 2585 disciplinary, payroll, health, and insurance records." That means that owners pay for personnel but are not allowed to know how much personnel is being paid. (See above FS 718). (Line 2583 ff.)

  • Line 2724: (12) COMPENSATION PROHIBITED. The whole provision is a joke because it does exactly the opposite of what the headline says. The language used allows board members to pay themselves using this paragraph: "(d) Any fee or compensation authorized in the governing documents." Since the bylaws are part of the governing documents 
    and bylaws can be changed by simple majority vote of the board:
    voila! (Line 2724 ff.)

  • Line 2849: Elections. Instead of using the proven language from FS 718, this language creates again more loopholes than solutions -- and will create more confusion and election challenges. The language again allows the election regulated by the "governing documents" -- allowing a sitting board to hold elections using rules that assure that the sitting board will be re-elected. (Line 2849 ff.)

  • Line 2937: 720.31 Recreational leaseholds; right to acquire; escalation clauses. Courts turned down the purchase of golf courses and the ability of boards to make club membership mandatory. Many recent examples from all over Florida show that golf courses are a sure bet to bankrupt associations and owners! Even the PGA admits that interest in golf is fading fast and the cost of maintaining golf courses is increasing quickly. Sachs Sax Caplan, P.L., the law firm of Peter Sachs, husband of House sponsor Representative Maria Sachs, has tried all over Florida to make this possible -- and got beaten up in every court they tried. This provision will help to bankrupt more community associations and owners. (Line 2937 ff.)

  • Line 2971: 720.315 Passage of special assessments. Some owners will say: Great! Ever considered that the developer can just make up for it by increasing the monthly dues? Nothing in this provision to prevent this! (Line 2971 ff.)

While a few condominiums may -- or may not -- profit from these provisions, many others will not. And the provisions in this bill dealing with homeowners' associations are outright bad!

 

If you feel that this bill will really help you and your association to deal with the multiple problems, please join the "Kumbayah" singers who think that everything that comes from these specialized attorneys must be just great. 

 

In case you don't -- especially after reading what all these provisions really do --you might do what I will do:
WRITE GOVERNOR CHARLIE CRIST A LETTER ASKING HIM TO VETO THIS OUTRAGEOUS BILL THAT REALLY DOES NEXT TO NOTHING TO DEAL WITH THE REAL PROBLEMS OWNERS AND ASSOCIATIONS ARE FACING ON A DAILY BASIS.

 

U.S. POSTAL ADDRESS:
The Honorable Charlie Crist

Governor, State of Florida

The Capitol, PL-05

400 South Monroe Street

Tallahassee, FL. 32399-0001

TELEPHONE HIS OFFICE:

Phone: (850) 487-0801

 

OR SEND HIM AN E-MAIL:

charlie.crist@myflorida.com

 

HURRY UP! The bill sponsors want to hurry the bill to the Governor's desk in order to have him sign the bill before receiving too many requests to veto this bad bill.


MY LETTER ASKING TO VETO S 1196

S 1196 -- ENROLLED


BACK TO
PRIORITY BILLS
HOME

LEGISLATIVE

SESSION 2010