Those who live and work in Florida know that there is no better place…anywhere.  However, every paradise must have its snake, and for us, that snake’s name is “windstorm.”  Hurricanes, tropical storms, cyclones, and the like are apt to occur anytime, but most particularly between the months of June and November.  Financial planning and budgeting for the ramifications of these disasters, including maintaining insurance, securing lines of credit, and maintaining reserves, can make the jobs of boards of directors that much more challenging.  Nevertheless, with proper planning, and open communication with the membership, associations can mitigate their damages and minimize surprise. Florida is the metaphorical “catcher’s mitt” for hurricanes and tropical storms, necessitating comprehensive property casualty insurance coverage. This includes protection for structural damage, common areas, and liability insurance.  For condominiums associations, the Florida Condominium Act (Chapter 718, Florida Statutes) requires that you must have full replacement coverage, which must be determined by an independent appraisal at least every 36 months.  However, as we all know, the number of insurance carriers authorized to do business in Florida continues to dwindle, and prices continue to soar.  Therefore, strategically the crux lies in choosing the right insurer. Selecting a reliable insurer is a pivotal decision. Condominium associations should prioritize "A" rated carriers for their financial stability and strong track record. Prominent carriers like Chubb, Allianz, and Travelers Insurance have earned their reputations in the Florida market.  If, as has happened to so many of us, you are cancelled and unable to find a replacement private carrier, we are fortunate to at least have Citizens Insurance as our carrier of last resort. Insurance premiums continue to rise with each windstorm.  In fact, while most associations experienced a significant increase last year, that increase did not include the calculation of damages caused by Hurricane Ian, and most experts anticipate even greater insurance costs during 2024.  Managing premium payments can pose a challenge. To alleviate the financial burden, associations may opt for installment plans or explore financing options. Additionally, implementing risk mitigation measures, such as storm-resistant building improvements, may help curtail long-term premium costs.  Consideration should...

Surplus funds are extra monies above the foreclosure judgment amount held by the Clerk of Court following a sale in a foreclosure case. The plaintiff in such cases (either the Bank or the Association) may only bid up to its judgment amount at the sale. If the winning bid is higher than the judgment amount, the difference between the winning bid and the judgment amount are the surplus funds.  For example, a Bank obtains a judgment for $300,000.00 representing the past-due principal, interest, late fees, attorney’s fees, and costs associated with the mortgage foreclosure lawsuit it filed. At a subsequent public sale, the Bank bids up to its $300,000.00 judgment but the property is so highly coveted that it attracts additional bidding by private parties. These third parties push the bidding well above $300,000.00 and the winning bid is ultimately, for example, $450,000.00 from third-party bidder, John Doe. In this scenario, the surplus funds are $150,000.00.  The Clerk will hold the $150,000.00 in surplus funds in the court registry until a court order instructs the Clerk as to how to distribute the money. A few weeks following the sale, the Clerk will issue the certificate of disbursement which itemizes how much money, if any, is held in the court registry from the foreclosure sale. All parties to the foreclosure case will receive a copy of the certificate of disbursement and will be put on notice of any surplus fund amounts.  If there’s no surplus funds, then the plaintiff Bank, in our example, is the winning bidder at the mortgage foreclosure sale.  Junior lienholders in such a mortgage foreclosure case such as second mortgages, and condominium and homeowners associations claiming unpaid assessments, may and should also file claims against the surplus funds.  The sooner a claim is filed, the sooner it may be set for hearing before the judge. Of course, often there may not be enough surplus funds to pay all junior lienholders in full, so time is of the essence. A junior lienholder who gets in front of the judge first may get paid on its claim if no other...

An important function of a community association is to oversee essential services that vendors provide for the community such as landscaping, pest control, asphalt paving, and security.  These services require written contracts which should include important terms that protect the association, particularly in the event that the vendor does not perform its side of the bargain or causes damage to a person or property.  As further discussed, it is easier to prevent large costs and legal exposure to an association by sound contract language crafted or approved by an attorney at the start of a relationship with a vendor than to repair the damage that a poorly worded agreement that was simply signed on an association’s behalf without legal review has created. Legal counsel’s assistance with vendor, and other service, contracts can be important.  Contract disputes can be very expensive and time-consuming.  And, such disputes aren’t always incorporated into the association’s annual budget which could put a lot of financial strain on the association and lead to unpopular special assessments.  Also, the association can be stuck with a vendor that is doing a poor job.   Some examples of where an attorney’s advice is important include making sure the vendor is contractually obligated to provide sufficient insurance and that there are well worded indemnification provisions.  There are some nuances in Florida law regarding indemnity and all too often it seems that contracts created by vendors are one-sided and don’t protect the association in the event for example that a third party is injured as a result of the vendor’s services.  Also, contracts created by the vendor may be unclear or unfavorable to the association regarding the vendor’s responsibilities, the timeframe by which the work must be commenced and completed, payment terms, recourse for the vendor’s failure to perform, warranties, under what conditions the agreement can be terminated, and where litigation must be commenced if there is a dispute, to name just some possible provisions where an attorneys’ involvement in contract review can be very important.  I recall an instance where a national vendor puts in its standard contract that any lawsuit...

Leasing a home or office can be an overwhelming process. There are many factors a prospective tenant should take into consideration before signing a lease agreement. The following are some of the more important questions that you should consider before signing a lease agreement: #1 - What utilities or amenities are included or not included in the rent cost? In order to ensure that there are no unexpected additional costs, the lease should clearly define the responsibilities of the parties. For instance, clarify which party is covering amenities like parking, utilities, cable, lawn care, storage, exterminator fees, etc. #2 - How long is this lease term? Make sure the lease term is for the timeframe you expect to stay at the premises. However, in unforeseen circumstances, you may be forced to either cut short your stay or extend your stay. One solution may be to add a provision to the lease agreement allowing you to terminate your lease early upon the payment of an early termination fee (typically 2 months of rent). Another solution may be adding an extension right (at the same or similar base rent) allowing you to extend the term of the lease by another year. #3 – Is Subletting allowed? Subletting involves renting out your space temporarily to another person, while the lease still stays in your name. This is helpful if you want to avoid breaking the lease early, or if you are not going to be in your space for extended periods of time. #4 - What is allowed when it comes to making alterations? Make sure the lease includes your ability to perform minor alterations, such as hanging items on the walls, together with such other alterations that you may desire, such as painting the interior or changing the carpeting. #5 - When is a landlord allowed to enter the premises without an invitation? Except when there is an emergency, the lease should require a landlord to give at least 24 hours’ notice of their intent to enter the premises. It would also be helpful to restrict the landlord’s ability to enter to a...

Robert Kennedy once said, “It is the essence of responsibility to put the public good ahead of personal gain.” For Florida condominium and homeowners’ association officers and directors, this fiduciary responsibility to the members of your association is no different. You are not simply a figurehead! Rather, you are a leader, entrusted with the task of acting in the best interests of the association and its members. This means that you must exercise the utmost loyalty, good faith, and due care in carrying out your responsibilities. Loyalty means that you must put the interests of the association and its members before your own personal interests. This can be a difficult task, especially if you have close relationships with certain members, vendors or suppliers. However, you must always remember that your primary responsibility is to the association, and that any conflicts of interest must be disclosed and dealt with appropriately. Good faith means that you must act honestly and with integrity at all times. This includes making decisions based on what you believe is best for the association, rather than your own personal gain. You must also keep the interests of all members in mind, not just a select few. This can be challenging when you are faced with competing demands or limited resources. However, you must always strive to make decisions that are fair and reasonable, and that reflect the values and goals of the community at large. Due care means that you must exercise reasonable care and diligence in carrying out your responsibilities. This includes being informed about the issues facing the association, and seeking out expert advice when necessary. You must also be familiar with your association’s governing documents, rules and regulations, and applicable laws (Chapter 718, Chapter 720), in order to ensure that you are acting in accordance with their requirements. One of the most important aspects of your fiduciary duty as an officer and/or director of a community association is to maintain the financial health of the association. This means that you must ensure that the association is operating within its budget, and that all expenses are...

For many years, under HOA law (Chapter 720, Florida Statutes), there was a requirement that HOAs take nominations from the floor at their annual meeting. This put many people at disadvantage because if there was another nomination process prior to the annual meeting, people could put their name in advance and campaign for votes to the disadvantage of those who would later nominate themselves from the floor.  With condominium associations, as distinct from HOAs, you were not permitted to nominate yourself from the floor as the statute (Chapter 718, Florida Statutes) prohibits floor nominations. However, with HOAs, there was always a requirement to allow such nominations. Several years ago, Chapter 720 was amended to state that if an HOA’s election process took nominations prior to the annual meeting, you would not be required to take nominations from the floor on the date of the meeting (Section 720.306(9)(a)). The statute does not really define what it means by “election process”. Therefore, our interpretation up until recently had been that the board could adopt procedures or rules identifying an election process to take nominations prior to the annual meeting. Recently, some recent arbitration decisions ruled that the HOA’s election process must actually be spelled out in the HOA’s governing documents, such as the bylaws.  Therefore, if you are an HOA, and you wish to be able to have nominations taken prior to the annual meeting so that you are not required to take additional nominations from the floor, you must make sure that your bylaws or your governing documents spell that process out expressly, as opposed to only having board-adopted election procedures.  Since we are entering into the time of the year where many HOA’s are going through their elections, it is our recommendation that you consult with your HOA attorney to make sure that your governing documents and your election materials have a pre-call for candidates. If it is not, we recommend that you amend your documents to confirm that your election process is run in accordance with Chapter 720 and with your HOA documents moving forward. Steven G. Rappaport is a...

As written about extensively, last year Governor DeSantis signed legislation into law that requires condominiums and cooperatives, three (3) stories or higher: (i) to conduct milestone inspections, (ii) conduct a structural integrity reserve study, and (iii) based upon those studies, to implement and collect mandatory reserves from each unit owner.   These requirements become effective December 31, 2024.  The well-intended purpose of this legislation is to prevent another Surfside tragedy by forcing condominiums and cooperatives to collect reserves to address structural issues over time as opposed to waiving reserves and delaying the need for collection of funds to address repair problems in a timely manner.  While Florida’s Condominium and Cooperative Acts always required the Board of Directors to calculate reserves, members were allowed by majority vote to waive or reduce reserves which resulted in many associations not having the funds to  address expensive and necessary repairs when required.   As new legislation, there are some glitches that have caused confusion for those condominiums and cooperatives that are less than three stories.  Whereas the law is clear that effective December 31, 2024, condominiums, and cooperatives that are three (3) stories or higher must conduct inspections, obtain reserve studies, and implement and collect mandatory structural reserves, questions have arisen if the mandatory structural reserve requirements are applicable to condominiums and cooperatives that are less than three (3) stories, or if said reserves may be waived or reduced by its members.   Attorneys are somewhat divided on this issue.  Whereas some attorneys view the mandatory reserve requirement to only be applicable to condominiums and cooperatives that are three stories or higher; other attorneys believe that collection of mandatory reserves is required of all condominiums and cooperatives associations, irrespective of height.   The latter position is shared by the Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares and Mobile Homes, which regulates condominiums and cooperatives.  When asked about two (2) story condominiums, the Division took the position that the height of a condominium has no bearing on the requirement of collecting reserves or on its ability to waive reserves.   Until such time as the legislature or...

First and foremost, Sachs Sax Caplan would like to wish everyone a happy and healthy new year!  We know that this is a time for many people to make resolutions for the upcoming year ahead.  One resolution that many Associations may wish to make in 2023 is revisiting their rules and regulations.  Many Associations may have outdated rules and regulations that need to be updated and amended.  Other Associations may have been lax in their enforcement of rules and may need to republish their rules and restrictions, so that they may be properly enforced on a moving-forward basis. If you are an Association, whether a Condominium Association or Homeowners Association, that has not been uniformly enforcing your rules and regulations, Florida law allows you to go through a republication process whereby you send a letter to the community republishing the rule or restriction that has not been properly enforced which will allow you to enforce those rules on a moving-forward basis.  If you have any such restrictions, whether they are in your rules and regulations or in your Declaration of Covenants or Declaration of Condominium, it is important to avoid selective enforcement issues in the future, you republish this rule or restriction and “clean the slate” on a moving-forward basis.  You can send the rules and regulations or other restrictions out to the community with a cover letter stating that the Board of Directors, on a moving-forward basis, will be enforcing these restrictions.  Any pre-existing violations that were not enforced would likely need to be grandfathered, but at least this will allow the Associations to be in a better position to enforce these revitalized rules and regulations and other use restrictions. Also, this may be a good time for Associations to evaluate existing rules and regulations and to determine whether they need to be updated or amended.  It is important to remember that, while rules and regulations may be adopted by the Board without needing a membership vote (unless the documents specifically require a membership vote), if you are adopting or amending rules and regulations that regulate the use of Condominium...

Warren Buffett once said, “Risk comes from not knowing what you’re doing.” As we approach the end of 2022, we thought it appropriate to see if we can reduce the risk surrounding the management and operation of condominium and homeowners’ associations by focusing on five (5) relatively recent advances in Association Law that may have a profound effect on how these communities operate.  These five (5) areas are: assessment collection letters, association registration, alternative dispute resolution, fining and/or suspension of use rights, and, last, but certainly not least, reserves. As to collections, Sections 718.121(5) and 720.3085(3)(d), Fla. Stat., now require that condominium and homeowners’ associations may not require the payment of attorneys’ fees related to a past due assessment unless the association (or its managing agent) provides the unit owner with a notice letter giving the owner thirty (30) days within which to make payment.  A rebuttable presumption that this letter has been sent is created by the execution of an affidavit by an officer, director, agent, or licensed community association manager attesting to the same.  Thus, if your association plans on attempting to recover its attorneys’ fees from a unit owner for collection of past due assessments, the thirty (30) day letter and affidavit are a necessity. As part of Senate Bill 4-D, all condominium and cooperative associations with buildings three (3) stories or higher are required to report certain information to the Division of Florida Condominiums, Timeshares, and Mobile Homes, on or before January 1, 2023.  The information that is required includes, among other things: the name of the association, the number of buildings that are three (3) stories or higher in height, and the total number of units in those buildings.  Condominium and cooperative associations may register at http://www.myfloridalicense.com/DBPR/condos-timeshares-mobile-homes/building-report/. Since 1992, when a disagreement arose between a condominium association and a unit owner as to an issue that met the statutory definition of “dispute,” they were required to submit to what is called mandatory non-binding arbitration with the Florida Department of Business and Professional Regulation.  Disagreements between associations and owners in homeowners’ associations, on the other hand, had...

More than a year after the tragic collapse of the Champlain Towers South condominium building in Surfside, Florida, condominium and cooperative associations throughout Florida now face a host of new legal requirements and restrictions imposed by SB 4D, which was passed unanimously by the Florida Legislature and signed into law by Governor DeSantis on May 26, 2022. The legislation is aimed at protecting the long-term structural safety and integrity of multi-story buildings in Florida and preventing similar tragedies. In previous columns, SSC has discussed the inspection and transparency requirements of the new law. However, although such legislation may be long overdue and well-intentioned, unit owners in condominium and cooperative associations throughout Florida are likely to find that in the short term the cost of living in such buildings will increase significantly, as a result of the requirement that associations collect mandatory reserves on an ongoing basis. In addition to requiring “milestone inspections” and imposing new reporting and transparency standards on matters relating to building structural safety and integrity, SB 4D creates strict new requirements for associations three (3) stories or taller regarding the calculation and funding of reserves for long-term maintenance and replacement of certain “structural” components of these buildings. Specifically, at least once every ten (10) years, associations must now complete a so-called Structural Integrity Reserve Study (“SIRS”) for each building in the condominium or cooperative that is three stories or taller. A SIRS is defined as “a study of reserve funds required for future major repairs and replacement of the common areas based upon a visual inspection of the common areas." Although the reserve study may be performed “by any person qualified to perform such study,” such as an accountant, the visual inspection portion of the SIRS must be performed by a licensed engineer or architect. At a minimum, the SIRS must identify and state the remaining useful life and replacement cost or deferred maintenance expense of the common areas being visually inspected and, based upon such visual inspection, provide a recommended annual reserve amount that should be included in the association’s annual budget for those common areas. Several...

As Community Association attorneys, something we've been asked often lately is whether associations may hold their meetings strictly by Zoom or any other video conferencing or virtual process. The answer is Florida law does allow videoconferencing and provides the ability to do so for both members and board meetings.  For board meetings, the statute provides that directors may participate in any meeting virtually or by remote communication, including voting on board matters, and that remote communication is deemed to be “in person” participation.  Therefore, board meetings can be held in person, completely virtual, or a hybrid of both. Importantly, the statute requires that the directors attending remotely must be able to be heard by everyone else attending the meeting. For virtual meetings, this is easily accomplished as all participating in the videoconferencing can hear each other when they speak. For in-person meetings, it is necessary for a two-way speaker to be utilized so that any directors participating remotely can be heard by all in attendance.  As to members meetings, Florida law also provides that members may participate remotely. In this respect, the statute requires the board to adopt guidelines and procedures to verify that each person deemed present and authorized to vote remotely, is a member or proxy holder. Once those procedures and guidelines are established, members may participate in meetings remotely, are deemed to be present “in person” at the meeting and may vote remotely. Once the procedures and guidelines are adopted, members may participate in a meeting through Zoom or other videoconferencing methods either on their laptops, or by phone. The key is to be able to identify that the people participating are actually members or their authorized representatives (proxies) who can participate on behalf of the members. This is critical because it ensures that quorum requirements are complied with at virtual meetings.  When preparing the notice for a meeting, it is recommended that the notice specifies in advance whether the meeting is going to be strictly virtual or if it's going to be a hybrid, where some members are there in person and some are virtually attending. Then...

Born from the tragedy of Surfside’s Champlain Towers South collapse is the passage of Senate Bill 4D that was signed into law by Governor DeSantis on May 26, 2022. For the first time, state law now mandates that condominium and cooperative buildings that are three (3) stories or higher must undergo milestone structural integrity inspections, must obtain structural repair reserve studies or reports and in accordance with such inspections and reports, must collect adequate reserves to fund anticipated structural repairs to the association’s roof, load-bearing walls, floor, foundation, and other structural components enumerated in the new statute. Further, effective December 31, 2024, associations will no longer be able to waive these reserves or use the funds for different purposes. The necessity for these mandatory requirements was readily apparent as many condominium and cooperative communities delayed or otherwise put off making essential repairs due to financial concerns. Such delays, as recently demonstrated, may lead to tragic consequences. Now, the failure to fund reserves can be deemed a breach of fiduciary duty of the board of directors and officers of the condominium or cooperative association. A significant part of the new law also requires a level of transparency that has not existed beforehand. The Condominium (Chapter 718) and Cooperative (Chapter 719) Acts have always required their official records to be open for inspection by any owner or their representative. However, the recent amendments now stress a heightened level of importance in ensuring that structural inspection reports and reserve studies are publicized as follows: (1) condominium and cooperative associations must now distribute a copy of its required inspection report to all owners by either U.S. Mail, hand-delivery or if authorized beforehand by a unit owner, via email; (2) the inspection report must be posted in a conspicuous place on the common areas as well as published on the association’s website if such website is statutorily required; (3) both the inspection report and the structural reserve study must be kept with the official records of the association for at least fifteen (15) years; (4) a copy of the inspection report must be furnished to local...

The proverb “time and tide wait for no man” may be true, particularly regarding the impact of the sunny, salty, and windy conditions on structures along Florida’s coasts.  However, a recent law requiring periodic inspections of buildings will help protect community associations and the millions of people who live in condominium units from the harsh reality revealed by that expression.  These new safety measures may impact associations’ finances but careful planning ahead should mitigate against any severe impact on condominium unit owners.  Recently, and almost a year after the catastrophic collapse of Champlain Towers South in Surfside, Governor DeSantis signed into law requirements, unanimously approved by both chambers of the legislature for periodic inspections based on the age and location of buildings and for association condominium boards to set aside sufficient reserve money to cover future repairs.  Though the law took effect on May 26th, condominium buildings within the “milestone” age requirements have until December 31, 2024, to comply with the inspection requirements.  The milestone requirements apply to condominium buildings three (3) stories or higher and require that the following be re-certified as safe: (i) all buildings thirty years old or older; and (ii) those buildings at least twenty-five years old and within three (3) miles of the coast.  Every ten (10) years after that, all buildings to which the statewide structural inspection program applies must be re-certified again.  Generally, initial milestone structural inspections must be conducted by December 31st of the building’s 30th or 25th year based on the date the certificate of occupancy for the building was issued and depending upon its location in relation to the coast.  The new laws will not apply to most Chapter 720 Homeowners Associations provided that none of the structures within the community are three (3) stories or higher. There are two (2) phases for mandatory inspections.  If a visual inspection by a licensed engineer or architect reveals no signs of substantial structural deterioration, no further action is necessary until the next required inspection.  However, if structural deterioration is detected, a second phase of more thorough testing is required.  Such inspections may potentially...

As we pointed out in an earlier column, one of the direct side effects of the tragic Champlain South Tower collapse was the additional scrutiny and due diligence that mortgage companies were going to apply before issuing mortgages in condominiums. At that time, Federal National Mortgage Association (“Fannie Mae”) issued Lender Letter (LL-2021-14), titled Temporary Requirements for Condo and Co-op Projects, which imposed new “temporary” rules and restrictions pertaining to Fannie Mae’s purchase of loans from primary lenders on the secondary market. These new requirements went into effect on January 1, 2022. What has resulted since is the requirement that any mortgage servicer who wishes to write a mortgage that may eventually be sold on the secondary market must create robust questionnaires for associations to answer before a mortgage will be issued. The problem now is that condominium associations are receiving these questionnaires, and due to the breadth and scope of the questions, are unsure on how to answer. For example, the following examples may be found on questionnaires: Are there any conditions, project wide, regarding deferred maintenance (within the past 5 years) which may negatively impact the safety, structural soundness, habitability, or functional use of any individual unit or the project as a whole?If a unit is taken over in foreclosure, what is the maximum number of months of assessments for which the lender is responsible?What amount is currently in reserves?Is it anticipated that the project will have code enforcement violations in the future? andAre there any planned special assessments in the future? While we understand that the scope of these questions is based upon determining whether the structure of the building is sound, and that the association is in good financial footing, the reality is that many of these types of questions require a nuanced response. A response could impose significant liability to the association if answered incorrectly. §718.116(8), Florida Statutes contains the questions that an association is required to respond to for an estoppel certificate. These questions are more in the nature of, how much are the assessments, and how often are they paid, or is there a...

With the 2022 legislative session ending on March 11, very few pending association-related bills were passed this year.  However, one very important bill relating to tree removal for community associations was passed through both houses and now awaits the governor’s signature.  This bill, if signed into law, will have a very adverse effect on condominium and homeowners associations.   As many may recall, in previous sessions, the legislature enacted a law to provide that a local government, such as a city or county, may not require applications, permits or other approval processes for the pruning, trimming or removal of a tree on “residential property” if the owner of the property (i.e., association) provides documentation from an arborist or licensed landscape architect that the tree presents a danger to persons or property.  Many associations have been operating under the premise that this law would allow a community association to remove or otherwise deal with dangerous trees in the common areas, such as street trees, that pose a danger to the community and would allow the association to deal with these trees without having to go through the extensive permitting and approval process through the applicable cities or counties.  In fact, recently, Palm Beach County issued a clarification specifically interpreting the existing law to provide that “residential property” includes association common areas and would allow associations to remove trees without going through the cumbersome permitting and approval process.   However, the pending bill that is awaiting the governor’s signature would reverse this position in a way that would negatively affect community associations.  The pending legislation specifically defines “residential property” to mean a single family or detached building located on a lot used for single family residential purposes.  Therefore, under the new law, if it were to go into effect, it would become clear that trees located in the association’s common property would not be allowed this exception and would have to go through the applicable permitting and approval process with the city and/or county in which the tree is located. We understand that several groups that advocate on behalf of community associations are currently lobbying...