Condo Law Changes July 2017

Condo Law Changes July 2017 Passed by The Florida Legislature

New condo laws went into effect on July 1st 2017. The changes mostly dealt with setting rules and regulations to prevent fraud from association board members, and with processes for electronic record keeping and estoppel certificates.

Regulations for the Board of Directors

The board of directors in a condo homeowner’s association is responsible for managing the finances, maintaining the common grounds, enforcing rules and selecting and overseeing management. Associations typically hire professional management companies, but a lot of the decisions about awarding contracts, finances and enforcing rules is trusted to the Board of directors.

Most associations run smoothly. Home owners come together and elect leaders from among themselves. Sometimes rogue condo associations make news for fraud, embezzlement or bad management that creates challenges for resale. Low homeowner participation or long-standing board members who have already brought in their own network to back them can create a perfect storm for abuse of power.

It may be surprising that these changes are happening in 2017 and not laws that are already on the books.

Here are some of the highlights of the changes governing board members from condo associations as of July 1st 2017.

  • Board members are prohibited from awarding work to companies they own or have an interest in. This includes companies their family members work at, own or have a financial interest in. They must disclose any conflicts of interest.
  • Board members are prohibited from buying a unit in a foreclosure sale due to delinquent HOA dues.
  • Board members terms are limited to 8 consecutive years with some exceptions
  • Criminal penalties, including felonies and prison sentences, can be established for fraud conducted by board members.

Record keeping guidelines were also established. Within the next year condo associations of more than 150 units must have an online password-protected portal for owners.

The portal should contain:

  • The declaration of condominium
  • Articles of incorporation
  • Bylaws and regulations
  • Financial reports and annual budgets
  • Vendor contracts and management agreements
  • Meeting agendas

Estoppel Certificates

Background

The estoppel certificate is a letter that the home owner’s association prepares saying what is owned in HOA fees for a unit at a given time. An estoppel letter guarantees that the stated fees are the only ones due, as long as they are paid by the due date on the letter, no other fees will be due. That means once an estoppel certificate is issued and any balances are taken care of within the specified time frame, the HOA can’t come after the new owner for previous debts. Florida title companies require the estoppel letter to issue a clean title, and banks require a clean title in order to close on a loan. Most sales of condos or properties subject to an HOA require an estoppel certificate to close.

Previously the law was vague, only requiring that the fees charged by the HOA to prepare the estoppel certificate be reasonable and established in writing. Most home owner’s associations play nicely and the letters are often prepared within a few business days with an administrative fee ranging from zero to a couple hundred dollars. Since there were no laws governing it, some HOAs charged high fees of five hundred dollars or more, or took several weeks to prepare the letter, putting the closings at risk or preventing sales from going through.

Estoppel Certifcate Changes

Reasonable fees and time frames were established for estoppel certificates. Fees under normal circumstances cannot exceed $250 and must be delivered within 10 business days. If it is not delivered in time, no fee can be charged. If an expedited request is received and delivered in 3 business days, an additional $150 may be charged. Homeowner’s associations are permitted to add an additional $150 if a unit is delinquent on dues.

The estoppel certificate must be valid for 30 days if delivered electronically, or 35 days if delivered by standard mail.

The letter must contain the following information:

  • The assessment frequency and period
  • An itemized list of assets
  • Any capital contributions required
  • Special assessment information and when they are due
  • Any fees for resale or other fees
  • First rights of refusal if applicable
  • Insurance maintained by the HOA along with contact details

These changes are in addition to the previous law that required the letter to contain the association information, the unit owner information, a description of the property and the details on balances due with due dates and where to send payment.

Conclusion

The new condo regulations effective July 2017 simplify reporting and information sharing for homeowners, establish laws to protect owners from fraud committed by board members, and clarifies the estoppel letter expectations for resale of condominium units.

These are good and long overdue changes. Most associations are governed well and respected by the owners and community. The new laws help to shine some light on acceptable behavior for the few outliers that cause problems.

The biggest changes that associations will have to make an effort to comply with is the web portal for properties that have over 150 units. There is a full year grace period to comply with that change. In 2017, we expect information to be a quick login or download away, and there is no reason for homeowners associations to be any other way.

If you own a condo, get involved in your association. Attend meetings, and volunteer for the board if your time and interests allow. It is a great way to meet neighbors, and owner participation makes for a solid, well run community.

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