Bills have major changes in laws

Article Courtesy of the St. Petersburg Times

By JUDY STARK
Published June 19, 2004

The legislation awaiting Gov. Jeb Bush's signature includes bills that would make significant changes in laws governing real estate and the condo and homeowner associations millions of Floridians belong to.

Those bills, passed in this spring's legislative session, represent "the biggest package of changes in condo and community association law we've seen in 15 years or longer," said Peter Dunbar, a Tallahassee lawyer and former legislator who guided much of that legislation and is generally regarded as the go-to guy on Florida condo law.

Bush has until June 30 to act. To read the text of each bill and check its status with the governor's office, go to www.myflorida.com Click on "government," then "governor's home page," then "laws, executive orders and legislative actions," then "legislative affairs," then "2004 legislative actions."

This legislation (SB 2444) is intended to ward off sticker shock for new buyers when tax time rolls around.

If it becomes law, real estate contracts will have to contain these sentences: "Buyer should not rely on the seller's current property taxes as the amount of property taxes that the buyer may be obligated to pay in the year subsequent to purchase. A change of ownership or property improvements triggers reassessments of the property that could result in higher property taxes. If you have any questions concerning valuation, contact the county property appraiser's office for information."

The "Save Our Homes" provision in the state constitution limits real estate tax increases to 3 percent annually until a property is sold. Then the property is reassessed and taxed at the current rate, which might be many times what the seller was assessed, especially if he owned the property for a long time.

Some buyers, apparently unaware at purchase time that the taxes would be adjusted, have been astounded at tax time to learn what they must pay, compared with what the previous owners paid.

The Florida Association of Realtors supported this legislation, to inform buyers and to limit liability or ill will for realty agents "and (keep) that buyer as your seller down the road," said Trey Goldman, an association lawyer in Tallahassee.

This bill (SB 1184) says that if condo associations vote to change their policies on rentals, those changes do not apply to owners who do not approve them until their units are sold. It was pushed by Stephen Comley of Amelia Island. He rented his waterfront condo to tenants for several months each summer and counted on that rental to cover his mortgage. Then his association voted to disallow short-term rentals.

"The changes don't apply to nonconsenting unit owners," Dunbar said. If you oppose a change but it passes, you don't have to go along with it, but when you sell your unit, the change applies to the new owners. However, "if you vote for it, you live by it." Later, he and Jonathan J. Damonte, a lawyer and regional lobbying representative for the Community Associations Institute, acknowledged that if the vote is by secret ballot, who's to know how an individual owner voted?

Damonte said many condo associations are hurrying to tighten their rental policies before the governor signs the bill.

A controversial piece of legislation (HB 461) provides for a broker's lien for commissions and other fees in commercial real estate transactions.

The Florida Association of Realtors "is very much in favor of this bill," said Goldman, the association's lawyer. In commercial transactions, the real estate agent is sometimes "asked or forced to reduce their commission," and the only available remedy has been to sue, he said. This legislation allows the broker to place a lien against the property and subsequently foreclose to obtain a commission that was promised in writing.

"Unfortunately, it's not uncommon" for agents to face a demand to cut their commission, Goldman said. "Talk to anyone who has worked in commercial real estate any length of time and you'll hear plenty of stories." He said almost 20 states have some form of lien law and eight or nine have laws "almost identical to the bill we have passed."

Very few liens are filed, he acknowledged, but the threat of one is effective in resolving commission disputes. "The law works."

If the parties cannot work out a resolution, the disputed commission can be placed in escrow and the lien shifted to the escrow account rather than the property. The losing party pays the other side's fees, which Goldman said should make a realty agent think twice about liening. "That's designed to slow brokers down from unnecessarily encumbering a property," he said.

The law would apply to residences of more than four units and to brokers' consulting fees, management fees and leasing fees. That's a concern to the Community Associations Institute, which represents condos and homeowner associations. A broker who works as a property manager could file a lien if there were a dispute about management fees, said Damonte, the institute lobbyist.

Damonte, who is also a real estate agent, said, "In my 24 years of experience, when a broker had a written listing agreement, they got paid." The times when they didn't get paid, he said, "they didn't have it in writing." Problems occur when subagents and others "pop up right before closing" and claim they somehow were involved in the transaction and deserve a commission.

The Florida Bar calls the act "a bad piece of special-interest legislation." The Bar opposes liens on real property for work that adds no value, such as brokering a real estate transaction.

The broker's lien cannot be waived. Even if an agent says he will not invoke the right to lien, the law does not permit that. The Bar says that deprives buyers and lessees of "their right to bargain freely for brokerage services."

It also would allow a broker to file a lien before a closing but "notify the purchaser after a closing, penalizing the buyer, the lender and the title insurer for an unscrupulous seller's failure to pay the broker," the Bar says. Typically, sellers pay the commission, but the lien attaches to the property, and once the sale closes, that's the buyer's problem. The Bar is also concerned that if liening is permitted for commercial transactions, the Realtors will want to extend it to residential closings.

The governor has signed a bill allowing homeowners to fly the state flag (SB 1184) and the flags of the armed services, and tenants to fly the American flag (HB 1009). Condo owners already were allowed to fly the American flag.

Appearing at a legislative update breakfast June 10, Dunbar and Damonte, were asked whether the legislation permits the Confederate flag to fly. Both said no.

"There is no right to fly it. It's not covered in the statute, period," Dunbar said.

The Confederate flag represents no government in existence, Damonte said.

An association could write a rule prohibiting or permitting the Confederate flag, he said, just as some associations write rules prohibiting or permitting novelty and holiday flags.

The governor has signed a bill (SB 1728), sponsored by Mike Fasano, R-New Port Richey, that says condos and co-ops that meet the standards of "housing for the elderly" may vote to exempt themselves from retrofitting to provide handrails.