H391    GENERAL BILL by Domino (CS by Judiciary Appropriations (FC)) (Compare  H 0839, H 0957, S 0546, S 2358, S 2530)
Community Associations; provides for revival of certain covenants that
have lapsed; prohibits local ordinances that limit access of certain
persons to beaches that adjoin condominiums; requires association to
provide certain information to prospective purchasers or lienholders;
provides for architectural control covenants & parcel owner
improvements; revises provisions re dispute resolution, etc. Amends FS.
EFFECTIVE DATE: 07/01/2006 except as otherwise provided.
11/14/05 HOUSE Filed
12/23/05 HOUSE Referred to Civil Justice (JC); Justice Appropriations (FC);
                  Justice Council
12/30/05 HOUSE Original reference(s) removed: Justice Appropriations (FC);
                  Referred to- Civil Justice (JC); Judiciary Appropriations
                  (FC); Justice Council
01/13/06 HOUSE On Committee agenda-- Civil Justice (JC), 01/25/06, 9:30 am,
                  24-H
01/25/06 HOUSE Favorable with CS amendment by Civil Justice (JC); YEAS 6
                  NAYS 0
02/06/06 HOUSE Pending review of CS under Rule 6.3(b); Now in Judiciary
                  Appropriations (FC)
03/07/06 HOUSE Introduced, referred to Civil Justice (JC); Justice
                  Appropriations (FC); Justice Council -HJ 00037; Original
                  reference(s) removed: Justice Appropriations (FC) -HJ 00132;
                  Referred to- Civil Justice (JC); Judiciary Appropriations
                  (FC); Justice Council -HJ 00132; 

                  Civil Justice Committee --- On agenda for: 01/25/06 9:30 AM 
                  Favorable With Committee Substitute (final action); YEAS 6 NAYS 0 -

                  HJ  00138;
                  Pending review of CS under Rule 6.3(b); Now in Judiciary
                  Appropriations (FC) -HJ 00138
03/31/06 HOUSE On Committee agenda-- Judiciary Appropriations (FC),
                  04/04/06, 4:00 pm Or Upon Adjournment of the Fiscal Council,
                  28-H
04/04/06 HOUSE Favorable with CS amendment by Judiciary Appropriations (FC);
                  YEAS 4 NAYS 0
04/10/06 HOUSE Pending review of CS under Rule 6.3(b); Now in Justice
                  Council

CODING: Words stricken are deletions; words underlined are additions. 

1	The Judiciary Appropriations Committee recommends the following:
2
3	Council/Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to community associations; creating s.
7	712.11, F.S.; providing for the revival of certain
8	covenants that have lapsed; amending s. 718.106, F.S.;
9	prohibiting local ordinances that limit the access of
10	certain persons to beaches that adjoin condominiums;
11	amending s. 718.110, F.S.; revising provisions relating to
12	the amendment of declarations; providing legislative
13	findings and a finding of compelling state interest;
14	providing criteria for consent to an amendment; requiring
15	notice regarding proposed amendments to mortgagees;
16	providing criteria for notification; providing for voiding
17	certain amendments; amending s. 718.112, F.S.; revising
18	the implementation date for retrofitting of common areas
19	with a sprinkler system; amending s. 718.114, F.S.;
20	providing that certain leaseholds, memberships, or other
21	possessory or use interests shall be considered a material
22	alteration or substantial addition to certain real
23	property; amending s. 718.404, F.S.; providing retroactive
24	application of provisions relating to mixed-use
25	condominiums; amending s. 719.103, F.S.; providing a
26	definition; amending s. 719.507, F.S.; prohibiting laws,
27	ordinances, or regulations that apply only to improvements
28	that are or may be subjected to an equity club form of
29	ownership; amending s. 720.302, F.S.; revising governing
30	provisions relating to corporations that operate
31	residential homeowners' associations; amending s. 720.303,
32	F.S.; revising application to include certain meetings;
33	requiring the association to provide certain information
34	to prospective purchasers or lienholders; authorizing the
35	association to charge a reasonable fee for providing
36	certain information; requiring the budget to provide for
37	annual operating expenses; authorizing the budget to
38	include reserve accounts for capital expenditures and
39	deferred maintenance; providing a formula for calculating
40	the amount to be reserved; authorizing the association to
41	adjust replacement reserve assessments annually;
42	authorizing the developer to vote to waive the reserves or
43	reduce the funding of reserves for a certain period;
44	revising provisions relating to financial reporting;
45	revising time periods in which the association must
46	complete its reporting; repealing s. 720.303(2), F.S., as
47	amended, relating to board meetings, to remove conflicting
48	versions of that subsection; creating s. 720.3035, F.S.;
49	providing for architectural control covenants and parcel
50	owner improvements; authorizing the review and approval of
51	plans and specifications; providing limitations; providing
52	rights and privileges for parcel owners as set forth in
53	the declaration of covenants; amending s. 720.305, F.S.;
54	providing that, where a member is entitled to collect
55	attorney's fees against the association, the member may
56	also recover additional amounts as determined by the
57	court; amending s. 720.306, F.S.; providing that certain
58	mergers or consolidations of an association shall not be
59	considered a material or adverse alteration of the
60	proportionate voting interest appurtenant to a parcel;
61	amending s. 720.307, F.S.; requiring developers to deliver
62	financial records to the board in any transition of
63	association control to members; requiring certain
64	information to be included in the records and for the
65	records to be prepared in a specified manner; amending s.
66	720.308, F.S.; providing circumstances under which a
67	guarantee of common expenses shall be effective; providing
68	for approval of the guarantee by association members;
69	providing for a guarantee period and extension thereof;
70	requiring the stated dollar amount of the guarantee to be
71	an exact dollar amount for each parcel identified in the
72	declaration; providing payments required from the
73	guarantor to be determined in a certain manner; providing
74	a formula to determine the guarantor's total financial
75	obligation to the association; providing that certain
76	expenses incurred in the production of certain revenues
77	shall not be included in the operating expenses; amending
78	s. 720.311, F.S.; revising provisions relating to dispute
79	resolution; providing that the filing of any petition for
80	arbitration or the serving of an offer for presuit
81	mediation shall toll the applicable statute of
82	limitations; providing that certain disputes between an
83	association and a parcel owner shall be subject to presuit
84	mediation; revising provisions to conform; providing that
85	temporary injunctive relief may be sought in certain
86	disputes subject to presuit mediation; authorizing the
87	court to refer the parties to mediation under certain
88	circumstances; requiring the aggrieved party to serve on
89	the responding party a written offer to participate in
90	presuit mediation; providing a form for such offer;
91	providing that service of the offer is effected by the
92	sending of such an offer in a certain manner; providing
93	that the prevailing party in any subsequent arbitration or
94	litigation proceedings is entitled to seek recovery of all
95	costs and attorney's fees incurred in the presuit
96	mediation process; requiring the mediator or arbitrator to
97	meet certain certification requirements; removing a
98	requirement relating to development of an education
99	program to increase awareness of the operation of
100	homeowners' associations and the use of alternative
101	dispute resolution techniques; providing effective dates.
102
103	Be It Enacted by the Legislature of the State of Florida:
104
105	Section 1.  Section 712.11, Florida Statutes, is created to
106	read:
107	712.11  Covenant revitalization.--A homeowners' association
108	not otherwise subject to chapter 720 may use the procedures set
109	forth in ss. 720.403-720.407 to revive covenants that have
110	lapsed under the terms of this chapter.
111	Section 2.  Subsection (5) is added to section 718.106,
112	Florida Statutes, to read:
113	718.106  Condominium parcels; appurtenances; possession and
114	enjoyment.--
115	(5)  A local ordinance or regulation may not establish any
116	limitation on the ability of unit owners or an association to
117	permit guests, licensees, members, or invitees to use or access
118	their units or common elements for the purpose of accessing a
119	public beach or private beach adjacent to the condominium.
120	Section 3.  Effective October 1, 2006, subsection (11) of
121	section 718.110, Florida Statutes, is amended to read:
122	718.110  Amendment of declaration; correction of error or
123	omission in declaration by circuit court.--
124	(11)  The Legislature finds that the procurement of
125	mortgagee consent to amendments that do not affect the rights or
126	interests of mortgagees is an unreasonable and substantial
127	logistical and financial burden on the unit owners and that
128	there is a compelling state interest in enabling the members of
129	a condominium association to approve amendments to the
130	condominium documents through legal means. Accordingly, and
131	notwithstanding any provision to the contrary contained in this
132	section:
133	(a)  As to any mortgage recorded on or after October 1,
134	2006, any provision in the declaration, articles of
135	incorporation, or bylaws that requires recorded after April 1,
136	1992, may not require the consent or joinder of some or all
137	mortgagees of units or any other portion of the condominium
138	property to or in amendments to the declaration, articles of
139	incorporation, or bylaws or for any other matter shall be
140	enforceable only as to the following matters: unless the
141	requirement is limited to amendments materially affecting the
142	rights or interests of the mortgagees, or as otherwise required
143	by the Federal National Mortgage Association or the Federal Home
144	Loan Mortgage Corporation, and unless the requirement provides
145	that such consent may not be unreasonably withheld. It shall be
146	presumed that, except as to
147	1.  Those matters described in subsections (4) and (8).,
148	2.  Amendments to the declaration, articles of
149	incorporation, or bylaws that adversely affect the priority of
150	the mortgagee's lien or the mortgagee's rights to foreclose its
151	lien or that otherwise materially affect the rights and
152	interests of the mortgagees.
153	(b)  As to mortgages recorded before October 1, 2006, any
154	existing provisions in the declaration, articles of
155	incorporation, or bylaws requiring mortgagee consent shall be
156	enforceable.
157	(c)  In securing consent or joinder, the association shall
158	be entitled to rely upon the public records to identify the
159	holders of outstanding mortgages. The association may use the
160	address provided in the original recorded mortgage document,
161	unless there is a different address for the holder of the
162	mortgage in a recorded assignment or modification of the
163	mortgage, which recorded assignment or modification must
164	reference the official records book and page on which the
165	original mortgage was recorded. Once the association has
166	identified the recorded mortgages of record, the association
167	shall, in writing, request of each unit owner whose unit is
168	encumbered by a mortgage of record any information the owner has
169	in his or her possession regarding the name and address of the
170	person to whom mortgage payments are currently being made.
171	Notice shall be sent to such person if the address provided in
172	the original recorded mortgage document is different from the
173	name and address of the mortgagee or assignee of the mortgage as
174	shown by the public record. The association shall be deemed to
175	have complied with this requirement by making the written
176	request of the unit owners required under this paragraph. Any
177	notices required to be sent to the mortgagees under this
178	paragraph shall be sent to all available addresses provided to
179	the association.
180	(d)  Any notice to the mortgagees required under paragraph
181	(c) may be sent by a method that establishes proof of delivery,
182	and any mortgagee who fails to respond within 60 days after the
183	date of mailing shall be deemed to have consented to the
184	amendment.
185	(e)  For those amendments requiring mortgagee consent on or
186	after October 1, 2006, do not materially affect the rights or
187	interests of mortgagees. in the event mortgagee consent is
188	provided other than by properly recorded joinder, such consent
189	shall be evidenced by affidavit of the association recorded in
190	the public records of the county where the declaration is
191	recorded. Any amendment adopted without the required consent of
192	a mortgagee shall be voidable only by a mortgagee who was
193	entitled to notice and an opportunity to consent. An action to
194	void an amendment shall be subject to the statute of limitations
195	beginning 5 years from the date of discovery as to the
196	amendments described in subparagraph (a)2. and 5 years from the
197	date of recordation of the certificate of amendment for all
198	other amendments. This provision shall apply to all mortgages,
199	regardless of the date of recordation of the mortgage.
200	Section 4.  Paragraph (l) of subsection (2) of section
201	718.112, Florida Statutes, is amended to read:
202	718.112  Bylaws.--
203	(2)  REQUIRED PROVISIONS.--The bylaws shall provide for the
204	following and, if they do not do so, shall be deemed to include
205	the following:
206	(l)  Certificate of compliance.--There shall be a provision
207	that a certificate of compliance from a licensed electrical
208	contractor or electrician may be accepted by the association's
209	board as evidence of compliance of the condominium units with
210	the applicable fire and life safety code. Notwithstanding the
211	provisions of chapter 633 or of any other code, statute,
212	ordinance, administrative rule, or regulation, or any
213	interpretation of the foregoing, an association, condominium, or
214	unit owner is not obligated to retrofit the common elements or
215	units of a residential condominium with a fire sprinkler system
216	or other engineered lifesafety system in a building that has
217	been certified for occupancy by the applicable governmental
218	entity, if the unit owners have voted to forego such
219	retrofitting and engineered lifesafety system by the affirmative
220	vote of two-thirds of all voting interests in the affected
221	condominium. However, a condominium association may not vote to
222	forego the retrofitting with a fire sprinkler system of common
223	areas in a high-rise building. For purposes of this subsection,
224	the term "high-rise building" means a building that is greater
225	than 75 feet in height where the building height is measured
226	from the lowest level of fire department access to the floor of
227	the highest occupiable story. For purposes of this subsection,
228	the term "common areas" means any enclosed hallway, corridor,
229	lobby, stairwell, or entryway. In no event shall the local
230	authority having jurisdiction require completion of retrofitting
231	of common areas with a sprinkler system before the end of 2025
232	2014.
233	1.  A vote to forego retrofitting may be obtained by
234	limited proxy or by a ballot personally cast at a duly called
235	membership meeting, or by execution of a written consent by the
236	member, and shall be effective upon the recording of a
237	certificate attesting to such vote in the public records of the
238	county where the condominium is located. The association shall
239	mail, hand deliver, or electronically transmit to each unit
240	owner written notice at least 14 days prior to such membership
241	meeting in which the vote to forego retrofitting of the required
242	fire sprinkler system is to take place. Within 30 days after the
243	association's opt-out vote, notice of the results of the opt-out
244	vote shall be mailed, hand delivered, or electronically
245	transmitted to all unit owners. Evidence of compliance with this
246	30-day notice shall be made by an affidavit executed by the
247	person providing the notice and filed among the official records
248	of the association. After such notice is provided to each owner,
249	a copy of such notice shall be provided by the current owner to
250	a new owner prior to closing and shall be provided by a unit
251	owner to a renter prior to signing a lease.
252	2.  As part of the information collected annually from
253	condominiums, the division shall require condominium
254	associations to report the membership vote and recording of a
255	certificate under this subsection and, if retrofitting has been
256	undertaken, the per-unit cost of such work. The division shall
257	annually report to the Division of State Fire Marshal of the
258	Department of Financial Services the number of condominiums that
259	have elected to forego retrofitting.
260	Section 5.  Section 718.114, Florida Statutes, is amended
261	to read:
262	718.114  Association powers.--An association has the power
263	to enter into agreements, to acquire leaseholds, memberships,
264	and other possessory or use interests in lands or facilities
265	such as country clubs, golf courses, marinas, and other
266	recreational facilities. It has this power whether or not the
267	lands or facilities are contiguous to the lands of the
268	condominium, if they are intended to provide enjoyment,
269	recreation, or other use or benefit to the unit owners. All of
270	these leaseholds, memberships, and other possessory or use
271	interests existing or created at the time of recording the
272	declaration must be stated and fully described in the
273	declaration. Subsequent to the recording of the declaration,
274	agreements acquiring these leaseholds, memberships, or other
275	possessory or use interests not entered into within 12 months
276	following the recording of the declaration shall be considered a
277	material alteration or substantial addition to the real property
278	that is association property, and the association may not
279	acquire or enter into agreements acquiring these leaseholds,
280	memberships, or other possessory or use interests except as
281	authorized by the declaration as provided in s. 718.113. The
282	declaration may provide that the rental, membership fees,
283	operations, replacements, and other expenses are common expenses
284	and may impose covenants and restrictions concerning their use
285	and may contain other provisions not inconsistent with this
286	chapter. A condominium association may conduct bingo games as
287	provided in s. 849.0931.
288	Section 6.  Subsections (1) and (2) of section 718.404,
289	Florida Statutes, are amended to read:
290	718.404  Mixed-use condominiums.--When a condominium
291	consists of both residential and commercial units, the following
292	provisions shall apply:
293	(1)  The condominium documents shall not provide that the
294	owner of any commercial unit shall have the authority to veto
295	amendments to the declaration, articles of incorporation,
296	bylaws, or rules or regulations of the association. This
297	subsection shall apply retroactively as a remedial measure.
298	(2)  Subject to s. 718.301, where the number of residential
299	units in the condominium equals or exceeds 50 percent of the
300	total units operated by the association, owners of the
301	residential units shall be entitled to vote for a majority of
302	the seats on the board of administration. This subsection shall
303	apply retroactively as a remedial measure.
304	Section 7.  Subsections (18) through (27) of section
305	719.103, Florida Statutes, are renumbered as subsections (19)
306	through (28), respectively, and a new subsection (18) is added
307	to that section to read:
308	719.103  Definitions.--As used in this chapter:
309	(18)  "Equity facilities club" means a club comprised of
310	recreational facilities in which proprietary membership
311	interests are sold to individuals, which membership interests
312	entitle the individuals to use certain physical facilities owned
313	by the equity club. Such physical facilities do not include a
314	residential unit or accommodation. For purposes of this
315	definition, the term "accommodation" shall include, but is not
316	limited to, any apartment, residential cooperative unit,
317	residential condominium unit, cabin, lodge, hotel or motel room,
318	or any other accommodation designed for overnight occupancy for
319	one or more individuals.
320	Section 8.  Section 719.507, Florida Statutes, is amended
321	to read:
322	719.507  Zoning and building laws, ordinances, and
323	regulations.--All laws, ordinances, and regulations concerning
324	buildings or zoning shall be construed and applied with
325	reference to the nature and use of such property, without regard
326	to the form of ownership. No law, ordinance, or regulation shall
327	establish any requirement concerning the use, location,
328	placement, or construction of buildings or other improvements
329	which are, or may thereafter be, subjected to the cooperative or
330	equity facilities club form of ownership, unless such
331	requirement shall be equally applicable to all buildings and
332	improvements of the same kind not then, or thereafter to be,
333	subjected to the cooperative or equity facilities club form of
334	ownership. This section does not apply if the owner in fee of
335	any land enters into and records a covenant that existing
336	improvements or improvements to be constructed shall not be
337	converted to the cooperative form of residential ownership prior
338	to 5 years after the later of the date of the covenant or
339	completion date of the improvements. Such covenant shall be
340	entered into with the governing body of the municipality in
341	which the land is located or, if the land is not located in a
342	municipality, with the governing body of the county in which the
343	land is located.
344	Section 9.  Subsections (4) and (5) of section 720.302,
345	Florida Statutes, are amended to read:
346	720.302  Purposes, scope, and application.--
347	(4)  This chapter does not apply to any association that is
348	subject to regulation under chapter 718, chapter 719, or chapter
349	721; or to any nonmandatory association formed under chapter
350	723, except to the extent that a provision of chapter 718,
351	chapter 719, or chapter 721 is expressly incorporated into this
352	chapter for the purpose of regulating homeowners' associations.
353	(5)  Unless expressly stated to the contrary, corporations
354	not for profit that operate residential homeowners' associations
355	in this state shall be governed by and subject to chapter 607,
356	if the association was incorporated under that chapter, or to
357	chapter 617, if the association was incorporated under that
358	chapter, and this chapter. This subsection is intended to
359	clarify existing law.
360	Section 10.  Paragraph (a) of subsection (2), subsection
361	(6), and subsection (7) of section 720.303, Florida Statutes, as
362	amended by section 18 of chapter 2004-345 and section 135 of
363	chapter 2005-2, Laws of Florida, are amended, and paragraph (d)
364	is added to subsection (5) of that section, to read:
365	720.303  Association powers and duties; meetings of board;
366	official records; budgets; financial reporting; association
367	funds; recalls.--
368	(2)  BOARD MEETINGS.--
369	(a)  A meeting of the board of directors of an association
370	occurs whenever a quorum of the board gathers to conduct
371	association business. All meetings of the board must be open to
372	all members except for meetings between the board and its
373	attorney with respect to proposed or pending litigation where
374	the contents of the discussion would otherwise be governed by
375	the attorney-client privilege. The provisions of this subsection
376	shall also apply to the meetings of any committee or other
377	similar body when a final decision will be made regarding the
378	expenditure of association funds and to meetings of any body
379	vested with the power to approve or disapprove architectural
380	decisions with respect to a specific parcel of residential
381	property owned by a member of the community.
382	(5)  INSPECTION AND COPYING OF RECORDS.--The official
383	records shall be maintained within the state and must be open to
384	inspection and available for photocopying by members or their
385	authorized agents at reasonable times and places within 10
386	business days after receipt of a written request for access.
387	This subsection may be complied with by having a copy of the
388	official records available for inspection or copying in the
389	community. If the association has a photocopy machine available
390	where the records are maintained, it must provide parcel owners
391	with copies on request during the inspection if the entire
392	request is limited to no more than 25 pages.
393	(d)  The association or its authorized agent is not
394	required to provide a prospective purchaser or lienholder with
395	information about the residential subdivision or the association
396	other than information or documents required by this chapter to
397	be made available or disclosed. The association or its
398	authorized agent may charge a reasonable fee to the prospective
399	purchaser or lienholder or the current parcel owner or member
400	for providing good faith responses to requests for information
401	by or on behalf of a prospective purchaser or lienholder, other
402	than that required by law, if the fee does not exceed $50 plus
403	the reasonable cost of photocopying and any attorney's fees
404	incurred by the association in connection with the response.
405	(6)  BUDGETS.--
406	(a)  The association shall prepare an annual budget that
407	sets out the annual operating expenses. The budget must reflect
408	the estimated revenues and expenses for that year and the
409	estimated surplus or deficit as of the end of the current year.
410	The budget must set out separately all fees or charges paid for
411	by the association for recreational amenities, whether owned by
412	the association, the developer, or another person. The
413	association shall provide each member with a copy of the annual
414	budget or a written notice that a copy of the budget is
415	available upon request at no charge to the member. The copy must
416	be provided to the member within the time limits set forth in
417	subsection (5).
418	(b)  In addition to annual operating expenses, the budget
419	may include reserve accounts for capital expenditures and
420	deferred maintenance for which the association is responsible to
421	the extent that the governing documents do not limit increases
422	in assessments, including reserves. If the budget of the
423	association includes reserve accounts, such reserves shall be
424	determined, maintained, and waived in the manner provided in
425	this subsection. Once an association provides for reserve
426	accounts in the budget, the association shall thereafter
427	determine, maintain, and waive reserves in compliance with the
428	provisions of this subsection.
429	(c)  If the budget of the association does not provide for
430	reserve accounts governed by this subsection and the association
431	is responsible for the repair and maintenance of capital
432	improvements that may result in a special assessment if reserves
433	are not provided, each financial report for the preceding fiscal
434	year required by subsection (7) shall contain the following
435	statement in conspicuous type: THE BUDGET OF THE ASSOCIATION
436	DOES NOT PROVIDE FOR RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES
437	AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS.
438	OWNERS MAY ELECT TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO THE
439	PROVISIONS OF SECTION 720.303(6), FLORIDA STATUTES, UPON THE
440	APPROVAL OF NOT LESS THAN A MAJORITY OF THE TOTAL VOTING
441	INTERESTS OF THE ASSOCIATION.
442	(d)  An association shall be deemed to have provided for
443	reserve accounts when reserve accounts have been initially
444	established by the developer or when the membership of the
445	association affirmatively elects to provide for reserves. If
446	reserve accounts are not initially provided for by the
447	developer, the membership of the association may elect to do so
448	upon the affirmative approval of not less than a majority of the
449	total voting interests of the association. Such approval may be
450	attained by vote of the members at a duly called meeting of the
451	membership or upon a written consent executed by not less than a
452	majority of the total voting interests in the community. The
453	approval action of the membership shall state that reserve
454	accounts shall be provided for in the budget and designate the
455	components for which the reserve accounts are to be established.
456	Upon approval by the membership, the board of directors shall
457	provide for the required reserve accounts for inclusion in the
458	budget in the next fiscal year following the approval and in
459	each year thereafter. Once established as provided in this
460	subsection, the reserve accounts shall be funded or maintained
461	or shall have their funding waived in the manner provided in
462	paragraph (f).
463	(e)  The amount to be reserved in any account established
464	shall be computed by means of a formula that is based upon
465	estimated remaining useful life and estimated replacement cost
466	or deferred maintenance expense of each reserve item. The
467	association may adjust replacement reserve assessments annually
468	to take into account any changes in estimates of cost or useful
469	life of a reserve item.
470	(f)  Once a reserve account or reserve accounts are
471	established, the membership of the association, upon a majority
472	vote at a meeting at which a quorum is present, may provide for
473	no reserves or less reserves than required by this section. If a
474	meeting of the unit owners has been called to determine whether
475	to waive or reduce the funding of reserves and no such result is
476	achieved or a quorum is not present, the reserves as included in
477	the budget shall go into effect. After the turnover, the
478	developer may vote its voting interest to waive or reduce the
479	funding of reserves. Any vote taken pursuant to this subsection
480	to waive or reduce reserves shall be applicable only to one
481	budget year.
482	(g)  Funding formulas for reserves authorized by this
483	section shall be based on either a separate analysis of each of
484	the required assets or a pooled analysis of two or more of the
485	required assets.
486	1.  If the association maintains separate reserve accounts
487	for each of the required assets, the amount of the contribution
488	to each reserve account shall be the sum of the following two
489	calculations:
490	a.  The total amount necessary, if any, to bring a negative
491	component balance to zero.
492	b.  The total estimated deferred maintenance expense or
493	estimated replacement cost of the reserve component less the
494	estimated balance of the reserve component as of the beginning
495	of the period for which the budget will be in effect. The
496	remainder, if greater than zero, shall be divided by the
497	estimated remaining useful life of the component.
498
499	The formula may be adjusted each year for changes in estimates
500	and deferred maintenance performed during the year and may
501	include factors such as inflation and earnings on invested
502	funds.
503	2.  If the association maintains a pooled account of two or
504	more of the required reserve assets, the amount of the
505	contribution to the pooled reserve account as disclosed on the
506	proposed budget shall not be less than that required to ensure
507	that the balance on hand at the beginning of the period for
508	which the budget will go into effect plus the projected annual
509	cash inflows over the remaining estimated useful life of all of
510	the assets that make up the reserve pool are equal to or greater
511	than the projected annual cash outflows over the remaining
512	estimated useful lives of all of the assets that make up the
513	reserve pool, based on the current reserve analysis. The
514	projected annual cash inflows may include estimated earnings
515	from investment of principal. The reserve funding formula shall
516	not include any type of balloon payments.
517	(h)  Reserve funds and any interest accruing thereon shall
518	remain in the reserve account or accounts and shall be used only
519	for authorized reserve expenditures unless their use for other
520	purposes is approved in advance by a majority vote at a meeting
521	at which a quorum is present. Prior to turnover of control of an
522	association by a developer to parcel owners, the developer-
523	controlled association shall not vote to use reserves for
524	purposes other than those for which they were intended without
525	the approval of a majority of all nondeveloper voting interests
526	voting in person or by limited proxy at a duly called meeting of
527	the association.
528	(7)  FINANCIAL REPORTING.--Within 90 days after the end of
529	the fiscal year, or annually on the date provided in the bylaws,
530	the association shall prepare and complete, or contract with a
531	third party for the preparation and completion of, a financial
532	report for the preceding fiscal year. Within 21 days after the
533	final financial report is completed by the association or
534	received from the third party, but not later than 120 days after
535	the end of the fiscal year or other date as provided in the
536	bylaws, the association shall prepare an annual financial report
537	within 60 days after the close of the fiscal year. The
538	association shall, within the time limits set forth in
539	subsection (5), provide each member with a copy of the annual
540	financial report or a written notice that a copy of the
541	financial report is av