| 1 |
The Civil Justice 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 homeowners' associations;
amending s. |
| 7 |
720.303, F.S.; revising the powers and duties
of |
| 8 |
homeowners' associations; requiring certain
associations |
| 9 |
to be incorporated in this state; removing a
provision |
| 10 |
authorizing associations to operate more than
one |
| 11 |
community; prohibiting officers and directors
from taking |
| 12 |
any action that is inconsistent with the
declaration of |
| 13 |
covenants; authorizing associations to settle
actions on |
| 14 |
appeal; revising procedures relating to legal
actions |
| 15 |
commenced by the association; lowering the
dollar amount |
| 16 |
for which the association must obtain
approval by the |
| 17 |
members of the association before proceeding
with the |
| 18 |
legal action; authorizing the association to
enter into |
| 19 |
certain contracts; removing provisions
authorizing an |
| 20 |
association to have more than one class of
members and to |
| 21 |
issue membership certificates; prohibiting
certain |
| 22 |
association defenses; prohibiting
associations from |
| 23 |
restricting a member's freedom of association
and from |
| 24 |
limiting the number of guests a member may
have within a |
| 25 |
24-hour period; providing that officers and
directors of |
| 26 |
an association may be personally liable for
damages under |
| 27 |
certain circumstances; providing compensation
for certain |
| 28 |
members under certain circumstances;
providing criteria |
| 29 |
for establishing setback limits; prohibiting
the |
| 30 |
association from denying or refusing to
approve a member's |
| 31 |
plans for building on the member's property
under certain |
| 32 |
circumstances; requiring the budget to
provide for annual |
| 33 |
operating expenses; requiring the budget to
include |
| 34 |
reserve accounts for capital expenditures and
deferred |
| 35 |
maintenance; providing the amount to be
reserved; |
| 36 |
authorizing the association to adjust
replacement reserve |
| 37 |
assessments annually; authorizing the
developer to vote to |
| 38 |
waive the reserves or reduce the funding of
reserves for a |
| 39 |
certain period; revising provisions relating
to financial |
| 40 |
reporting; revising time periods in which the
association |
| 41 |
must complete its reporting; amending s.
720.307, F.S.; |
| 42 |
requiring developers to deliver financial
records to the |
| 43 |
board; requiring certain information to be
included in the |
| 44 |
records and for the records to be prepared in
a specified |
| 45 |
manner; amending s. 720.308, F.S.; providing
that a |
| 46 |
guarantee of common expenses shall be
effective under |
| 47 |
certain circumstances; requiring the
guarantee to meet |
| 48 |
certain requirements; authorizing the
guarantee to provide |
| 49 |
certain requirements; requiring the stated
dollar amount |
| 50 |
of the guarantee to be an exact dollar amount
for each |
| 51 |
parcel identified in the declaration;
providing payments |
| 52 |
required from the guarantor to be determined
in a certain |
| 53 |
manner; providing a formula to determine the
guarantor's |
| 54 |
total financial obligation to the
association; providing |
| 55 |
that certain expenses incurred in the
production of |
| 56 |
certain revenues shall not be included in the
common |
| 57 |
expenses; providing an effective date. |
| 58 |
|
| 59 |
Be It Enacted by the Legislature of the State
of Florida: |
| 60 |
|
| 61 |
Section 1. Subsections
(1), (6), and (7) of section |
| 62 |
720.303, Florida Statutes, are amended to
read: |
| 63 |
720.303 Association
powers and duties; meetings of board; |
| 64 |
official records; budgets; financial
reporting; association |
| 65 |
funds; recalls.-- |
| 66 |
(1) POWERS
AND DUTIES.-- |
| 67 |
(a) An
association which operates a community as defined |
| 68 |
in s. 720.301, must be incorporated
in this state, operated by |
| 69 |
an association that is a
Florida corporation. After October 1, |
| 70 |
1995, the
association must be incorporated and the initial |
| 71 |
governing documents must be recorded in the
official records of |
| 72 |
the county in which the community is located.
An association may |
| 73 |
operate more than one
community. |
| 74 |
(b) The
officers and directors of an association have a |
| 75 |
fiduciary relationship to the members of
who are served by the |
| 76 |
association. |
| 77 |
(c) The
powers and duties of an association include those |
| 78 |
set forth in this chapter and,
except as expressly limited or |
| 79 |
restricted in this
chapter, those specifically set forth in the |
| 80 |
governing documents. The
officers and directors of the |
| 81 |
association may not take
any action that is inconsistent with |
| 82 |
the declaration of
covenants. |
| 83 |
(d) After
control of the association is obtained by |
| 84 |
members from the
developers other than the
developer, the |
| 85 |
association may institute, maintain, or
settle on, or appeal |
| 86 |
actions or hearings
in its name on behalf of the all members |
| 87 |
concerning matters of common interest to the
members, including, |
| 88 |
but not limited to, the
common areas; roof or structural |
| 89 |
components of a building,
or other improvements for which the |
| 90 |
association is
responsible; mechanical, electrical, or plumbing |
| 91 |
elements serving an
improvement or building for which the |
| 92 |
association is
responsible; representations of the developer |
| 93 |
pertaining to any existing
or proposed commonly used facility; |
| 94 |
and protesting ad valorem
taxes on commonly used facilities. The |
| 95 |
association may defend
actions in eminent domain or bring |
| 96 |
inverse condemnation
actions. Before commencing any
legal action |
| 97 |
litigation
against any party in the name of the association |
| 98 |
involving amounts in controversy in excess of
$50,000 $100,000, |
| 99 |
the association must obtain the
affirmative approval of a |
| 100 |
majority of the members
of the association voting
interests at a |
| 101 |
meeting of the association membership
at which a quorum is |
| 102 |
present has
been attained. |
| 103 |
(e) The
association may enter into contracts for the |
| 104 |
benefit of the members of
the association, including, but not |
| 105 |
limited to, contracts for
maintaining, repairing, or improving |
| 106 |
the common areas of
the association. This
subsection does not |
| 107 |
limit any statutory or
common-law right of any individual member |
| 108 |
or class of members to
bring any action without participation by |
| 109 |
the association. |
| 110 |
(f) A
member does not have the
authority to act for the |
| 111 |
association by virtue of being a member of
the association. An |
| 112 |
association may have more
than one class of members and may |
| 113 |
issue membership
certificates. |
| 114 |
(g) In
any action between a member and the association, it |
| 115 |
shall not be a defense by
the association that the association's |
| 116 |
actions, although
inconsistent with the declaration of |
| 117 |
covenants, have been
uniformly applied. |
| 118 |
(h) An
association may not restrict a member's freedom of |
| 119 |
association and may not
limit the number of guests a member may |
| 120 |
have within a 24-hour
period. |
| 121 |
(i) An
association of 15 or fewer parcels
parcel owners |
| 122 |
may enforce only the
requirements of those deed restrictions |
| 123 |
established prior to the purchase of each
parcel upon an |
| 124 |
affected parcel owner or owners. |
| 125 |
(j) The
officers and directors of an association may be |
| 126 |
personally liable for
damages to a member if the actions of the |
| 127 |
officers and directors
demonstrate a pattern of behavior |
| 128 |
designed to harass a
member of the association. |
| 129 |
(k) Any
action of the association by and through the |
| 130 |
officers and directors
that limits the legal use of any portion |
| 131 |
of a member's property
which is inconsistent with the |
| 132 |
declaration of covenants
shall entitle the member to |
| 133 |
compensation for the fair
market value of that portion of the |
| 134 |
member's property the use
of which is being restricted. |
| 135 |
(l) In
any association with more than 50 but fewer than 75 |
| 136 |
parcels, for purposes of
establishing setback limits, any parcel |
| 137 |
of 1 acre or less shall be
deemed to have one front for purposes |
| 138 |
of determining the
required front setback, if any. Only those |
| 139 |
setbacks specifically set
forth in the declaration of covenants |
| 140 |
may be enforced by the
association. Where the covenants are |
| 141 |
silent, the applicable
county or municipal setbacks shall apply. |
| 142 |
(m) The
association may not deny or refuse to approve a |
| 143 |
member's plans for
building on the member's property unless the |
| 144 |
plan under consideration
violates a specific provision of the |
| 145 |
declaration of covenants. |
| 146 |
(6) BUDGETS.-- |
| 147 |
(a) The
association shall prepare an annual budget |
| 148 |
providing for the
annual operating expenses. The budget must |
| 149 |
reflect the estimated revenues and expenses
for that year and |
| 150 |
the estimated surplus or deficit as of the
end of the current |
| 151 |
year. The budget must set out separately all
fees or charges for |
| 152 |
recreational amenities, whether owned by the
association, the |
| 153 |
developer, or another person. The association
shall provide each |
| 154 |
member with a copy of the annual budget or a
written notice that |
| 155 |
a copy of the budget is available upon
request at no charge to |
| 156 |
the member. The copy must be provided to the
member within the |
| 157 |
time limits set forth in subsection (5). |
| 158 |
(b) In
addition to annual operating expenses, the budget |
| 159 |
shall include reserve
accounts for capital expenditures and |
| 160 |
deferred maintenance.
These accounts shall include, but are not |
| 161 |
limited to, roof
replacement, building painting, and pavement |
| 162 |
resurfacing, regardless of
the amount of deferred maintenance |
| 163 |
expense or replacement
cost, and any other item for which the |
| 164 |
deferred maintenance
expense or replacement cost exceeds |
| 165 |
$10,000. The amount to be
reserved shall be computed by means of |
| 166 |
a formula that is based
upon estimated remaining useful life and |
| 167 |
estimated replacement cost
or deferred maintenance expense of |
| 168 |
each reserve item. The
association may adjust replacement |
| 169 |
reserve assessments
annually to take into account any changes in |
| 170 |
estimates or extension of
the useful life of a reserve item |
| 171 |
caused by deferred
maintenance. This paragraph does not apply to |
| 172 |
an adopted budget for
which the members of an association have |
| 173 |
determined, by a majority
vote at a duly called meeting of the |
| 174 |
association, to provide no
reserves or fewer reserves than |
| 175 |
required by this
paragraph. However, prior to turnover of |
| 176 |
control of an association
by a developer to unit owners, the |
| 177 |
developer may vote to
waive the reserves or reduce the funding |
| 178 |
of reserves for the first
2 fiscal years of the association's |
| 179 |
operation, beginning with
the fiscal year in which the initial |
| 180 |
declaration is recorded,
after which time reserves may be waived |
| 181 |
or reduced only upon the
vote of a majority of all nondeveloper |
| 182 |
voting interests voting in
person or by limited proxy at a duly |
| 183 |
called meeting of the
association. If a meeting of the unit |
| 184 |
owners has been called to
determine whether to waive or reduce |
| 185 |
the funding of reserves
and no such result is achieved or a |
| 186 |
quorum is not attained,
the reserves as included in the budget |
| 187 |
shall go into effect.
After the turnover, the developer may vote |
| 188 |
its voting interest to
waive or reduce the funding of reserves. |
| 189 |
(7) FINANCIAL
REPORTING.--Within 90 days after the end
of |
| 190 |
the fiscal year, or
annually on the date provided in the bylaws, |
| 191 |
the association shall prepare and
complete, or contract for the |
| 192 |
preparation and
completion of, a an annual
financial report for |
| 193 |
the preceding fiscal
year. Within 21 60
days after the final |
| 194 |
financial report is
completed by the association or received |
| 195 |
from the third party, but
not later than 120 days after the end |
| 196 |
of the fiscal year or
other date as provided in the bylaws, |
| 197 |
close of the fiscal
year. the association shall, within the time |
| 198 |
limits set forth in subsection (5), provide
each member with a |
| 199 |
copy of the annual financial report or a
written notice that a |
| 200 |
copy of the financial report is available
upon request at no |
| 201 |
charge to the member. Financial reports shall
be prepared as |
| 202 |
follows: |
| 203 |
(a) An
association that meets the criteria of this |
| 204 |
paragraph shall prepare or cause to be
prepared a complete set |
| 205 |
of financial statements in accordance with
generally accepted |
| 206 |
accounting principles as
adopted by the Board of Accountancy. |
| 207 |
The financial statements shall be based upon
the association's |
| 208 |
total annual revenues, as follows: |
| 209 |
1. An
association with total annual revenues of $100,000 |
| 210 |
or more, but less than $200,000, shall
prepare compiled |
| 211 |
financial statements. |
| 212 |
2. An
association with total annual revenues of at least |
| 213 |
$200,000, but less than $400,000, shall
prepare reviewed |
| 214 |
financial statements. |
| 215 |
3. An
association with total annual revenues of $400,000 |
| 216 |
or more shall prepare audited financial
statements. |
| 217 |
(b)1. An
association with total annual revenues of less |
| 218 |
than $100,000 shall prepare a report of cash
receipts and |
| 219 |
expenditures. |
| 220 |
2. An
association in a community of fewer than 50 parcels, |
| 221 |
regardless of the association's annual
revenues, may prepare a |
| 222 |
report of cash receipts and expenditures in
lieu of financial |
| 223 |
statements required by paragraph (a) unless
the governing |
| 224 |
documents provide otherwise. |
| 225 |
3. A
report of cash receipts and disbursement must |
| 226 |
disclose the amount of receipts by accounts
and receipt |
| 227 |
classifications and the amount of expenses by
accounts and |
| 228 |
expense classifications, including, but not
limited to, the |
| 229 |
following, as applicable: costs for security,
professional, and |
| 230 |
management fees and expenses; taxes; costs
for recreation |
| 231 |
facilities; expenses for refuse collection
and utility services; |
| 232 |
expenses for lawn care; costs for building
maintenance and |
| 233 |
repair; insurance costs; administration and
salary expenses; and |
| 234 |
reserves if maintained by the association. |
| 235 |
(c) If
20 percent of the parcel owners petition the board |
| 236 |
for a level of financial reporting higher
than that required by |
| 237 |
this section, the association shall duly
notice and hold a |
| 238 |
meeting of members within 30 days of receipt
of the petition for |
| 239 |
the purpose of voting on raising the level of
reporting for that |
| 240 |
fiscal year. Upon approval of a majority of
the total voting |
| 241 |
interests of the parcel owners, the
association shall prepare or |
| 242 |
cause to be prepared, shall amend the budget
or adopt a special |
| 243 |
assessment to pay for the financial report
regardless of any |
| 244 |
provision to the contrary in the governing
documents, and shall |
| 245 |
provide within 90 days of the meeting or the
end of the fiscal |
| 246 |
year, whichever occurs later: |
| 247 |
1. Compiled,
reviewed, or audited financial statements, if |
| 248 |
the association is otherwise required to
prepare a report of |
| 249 |
cash receipts and expenditures; |
| 250 |
2. Reviewed
or audited financial statements, if the |
| 251 |
association is otherwise required to prepare
compiled financial |
| 252 |
statements; or |
| 253 |
3. Audited
financial statements if the association is |
| 254 |
otherwise required to prepare reviewed
financial statements. |
| 255 |
(d) If
approved by a majority of the voting interests |
| 256 |
present at a properly called meeting of the
association, an |
| 257 |
association may prepare or cause to be
prepared: |
| 258 |
1. A
report of cash receipts and expenditures in lieu of a |
| 259 |
compiled, reviewed, or audited financial
statement; |
| 260 |
2. A
report of cash receipts and expenditures or a |
| 261 |
compiled financial statement in lieu of a
reviewed or audited |
| 262 |
financial statement; or |
| 263 |
3. A
report of cash receipts and expenditures, a compiled |
| 264 |
financial statement, or a reviewed financial
statement in lieu |
| 265 |
of an audited financial statement. |
| 266 |
Section 2. Paragraph
(t) is added to subsection (3) of |
| 267 |
section 720.307, Florida Statutes, to read: |
| 268 |
720.307 Transition
of association control in a |
| 269 |
community.--With respect to homeowners'
associations: |
| 270 |
(3) At
the time the members are entitled to elect at least |
| 271 |
a majority of the board of directors of the
homeowners' |
| 272 |
association, the developer shall, at the
developer's expense, |
| 273 |
within no more than 90 days deliver the
following documents to |
| 274 |
the board: |
| 275 |
(t) The
financial records, including financial statements |
| 276 |
of the association, and
source documents from the incorporation |
| 277 |
of the association through
the date of turnover. The records |
| 278 |
shall be audited by an
independent certified public accountant |
| 279 |
for the period from the
incorporation of the association or from |
| 280 |
the period covered by the
last audit, if an audit has been |
| 281 |
performed for each fiscal
year since incorporation. All |
| 282 |
financial statements shall
be prepared in accordance with |
| 283 |
generally accepted
accounting principles and shall be audited in |
| 284 |
accordance with generally
accepted auditing standards, as |
| 285 |
prescribed by the Board of
Accountancy, pursuant to chapter 473. |
| 286 |
The certified public
accountant performing the audit shall |
| 287 |
examine to the extent
necessary supporting documents and |
| 288 |
records, including the
cash disbursements and related paid |
| 289 |
invoices to determine
whether expenditures were for association |
| 290 |
purposes and the billings,
cash receipts, and related records to |
| 291 |
determine whether the
developer was charged and paid the proper |
| 292 |
amounts of assessments. |
| 293 |
Section 3. Section
720.308, Florida Statutes, is amended |
| 294 |
to read: |
| 295 |
720.308 Assessments
and charges.-- |
| 296 |
(1) ASSESSMENTS.--For
any community created after October |
| 297 |
1, 1995, the governing documents must
describe the manner in |
| 298 |
which expenses are shared and specify the
member's proportional |
| 299 |
share thereof. Assessments levied pursuant to
the annual budget |
| 300 |
or special assessment must be in the member's
proportional share |
| 301 |
of expenses as described in the governing
document, which share |
| 302 |
may be different among classes of parcels
based upon the state |
| 303 |
of development thereof, levels of services
received by the |
| 304 |
applicable members, or other relevant
factors. While the |
| 305 |
developer is in control of the homeowners'
association, it may |
| 306 |
be excused from payment of its share of the
operating expenses |
| 307 |
and assessments related to its parcels for
any period of time |
| 308 |
for which the developer has, in the
declaration, obligated |
| 309 |
itself to pay any operating expenses incurred
that exceed the |
| 310 |
assessments receivable from other members and
other income of |
| 311 |
the association. This section does not apply
to an association, |
| 312 |
no matter when created, if the association is
created in a |
| 313 |
community that is included in an effective
development-of- |
| 314 |
regional-impact development order as of the
effective date of |
| 315 |
this act, together with any approved
modifications thereto. |
| 316 |
(2) GUARANTEE
OF COMMON EXPENSES.-- |
| 317 |
(a) Establishment
of a guarantee.--If a guarantee is not |
| 318 |
included in the purchase
contracts, declaration, or prospectus, |
| 319 |
any agreement establishing
a guarantee shall only be effective |
| 320 |
either upon the vote of a
majority of all nondeveloper voting |
| 321 |
interests voting in person
or by limited proxy at a duly called |
| 322 |
meeting of the association
or by agreement in writing without a |
| 323 |
meeting if provided in the
bylaws. Such guarantee shall meet the |
| 324 |
requirements of this
section. |
| 325 |
(b) Guarantee
period.--The period of time for the |
| 326 |
guarantee shall be
indicated by a specific beginning and ending |
| 327 |
date or event. |
| 328 |
1. The
ending date or event shall be the same for all of |
| 329 |
the members of a
homeowners' association, including members in |
| 330 |
different phases of
homeowners' associations. |
| 331 |
2. The
guarantee may provide for different intervals of |
| 332 |
time during a guarantee
period with different dollar amounts for |
| 333 |
each such interval. |
| 334 |
(c) Guarantee
extension.--The guarantee may provide that |
| 335 |
after the initial stated
period the developer has an option to |
| 336 |
extend the guarantee for
one or more additional stated periods. |
| 337 |
The extension of a
guarantee is limited to extending the ending |
| 338 |
date or event; therefore,
the developer does not have the option |
| 339 |
of changing the level of
assessments guaranteed. |
| 340 |
(3) MAXIMUM
LEVEL OF ASSESSMENTS.--The stated dollar |
| 341 |
amount of the guarantee
shall be an exact dollar amount for each |
| 342 |
parcel identified in the
declaration. Regardless of the stated |
| 343 |
dollar amount of the
guarantee, assessments charged to a member |
| 344 |
shall not exceed the
maximum obligation of the member based on |
| 345 |
the total amount of the
adopted budget and the member's |
| 346 |
proportionate ownership
share of the common elements. |
| 347 |
(4) CASH
FUNDING REQUIREMENTS DURING GUARANTEE.--The cash |
| 348 |
payments required from the
guarantor during the guarantee period |
| 349 |
shall be determined as
follows: |
| 350 |
(a) If
at any time during the guarantee period the funds |
| 351 |
collected from member
assessments at the guaranteed level and |
| 352 |
other revenues collected
by the association are not sufficient |
| 353 |
to provide payment, on a
timely basis, of all common expenses, |
| 354 |
including the full funding
of the reserves unless properly |
| 355 |
waived, the guarantor
shall advance sufficient cash to the |
| 356 |
association at the time
such payments are due. |
| 357 |
(b) Expenses
incurred in the production of nonassessment |
| 358 |
revenues, not in excess of
the nonassessment revenues, shall not |
| 359 |
be included in the common
expenses. If the expenses attributable |
| 360 |
to nonassessment revenues
exceed nonassessment revenues, only |
| 361 |
the excess expenses must
be funded by the guarantor. For |
| 362 |
example, if the
association operates a rental program in which |
| 363 |
rental expenses exceed
rental revenues, the guarantor shall fund |
| 364 |
the rental expenses in
excess of the rental revenues. Interest |
| 365 |
earned on the investment
of association funds may be used to pay |
| 366 |
the income tax expense
incurred as a result of the investment, |
| 367 |
such expense shall not be
charged to the guarantor, and the net |
| 368 |
investment income shall be retained by the
association. Each |
| 369 |
such nonassessment-revenue-generating
activity shall be |
| 370 |
considered separately.
Capital contributions collected from |
| 371 |
members are not revenues
and shall not be used to pay common |
| 372 |
expenses. |
| 373 |
(5) CALCULATION
OF GUARANTOR'S FINAL OBLIGATION.--The |
| 374 |
guarantor's total
financial obligation to the association at the |
| 375 |
end of the guarantee
period shall be determined on the accrual |
| 376 |
basis using the following
formula: the guarantor shall fund the |
| 377 |
total common expenses
incurred during the guarantee period, |
| 378 |
including the full funding
of the reserves unless properly |
| 379 |
waived, less the total
regular periodic assessments earned by |
| 380 |
the association from the
members other than the guarantor during |
| 381 |
the guarantee period,
regardless of whether the actual level |
| 382 |
charged was less than the
maximum guaranteed amount. |
| 383 |
(6) EXPENSES.--Expenses
incurred in the production of |
| 384 |
nonassessment revenues,
not in excess of the nonassessment |
| 385 |
revenues, shall not be
included in the common expenses. If the |
| 386 |
expenses attributable to
nonassessment revenues exceed |
| 387 |
nonassessment revenues,
only the excess expenses must be funded |
| 388 |
by the guarantor. For
example, if the association operates a |
| 389 |
rental program in which
rental expenses exceed rental revenues, |
| 390 |
the guarantor shall fund
the rental expenses in excess of the |
| 391 |
rental revenues. Interest
earned on the investment of |
| 392 |
association funds may be
used to pay the income tax expense |
| 393 |
incurred as a result of
the investment, such expense shall not |
| 394 |
be charged to the
guarantor, and the net investment income shall |
| 395 |
be retained by the
association. Each such nonassessment revenue- |
| 396 |
generating activity shall
be considered separately. Capital |
| 397 |
contributions collected
from members are not revenues and shall |
| 398 |
not be used to pay common
expenses. |
| 399 |
Section 4. This
act shall take effect July 1, 2006. |