Recent Advancements in Association Law

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 been required to go to mandatory mediation as a prerequisite to filing a lawsuit.  Now, the initiating party to a dispute with a condominium association may decide whether to go to mandatory non-binding arbitration, or to require mandatory mediation, subject to the requirements of Section 720.311, Fla. Stat., for homeowners’ association mediations.  One difference is that in mediation, the parties split the costs of mediation, and they have the opportunity to try to voluntarily work out their differences.  In the case of arbitration, an arbitrator makes the decision for them, although it is not necessarily binding.  

With respect to covenant enforcement, applying to both condominiums and homeowners’ associations, in order to levy fines or suspend use rights, the association must convene a committee to hear evidence and to make a determination as to whether the fine or suspension should be imposed.  Pursuant to current law, the role of the committee is simply to approve or disapprove of the fine or suspension already imposed by the board.  The committee has no discretion to do anything else; it simply must say yes or no.  Accordingly, the board must first meet and vote to impose a fine or suspension.  Then a statutory fourteen (14) day notice must be sent to the person to be fined or suspended.  Consequently, a committee hearing must be held, where the committee votes yes or no to impose the fine or suspension already voted upon by the board.

Finally, let’s define what it means to have statutorily required “fully funded reserves.”  We’ll use roofs as an example.  The term “fully funded reserves” refers to a savings plan where your goal of having enough money to replace your roof is met by figuring out how much it will cost to do the replacement and dividing that amount by the number of years you have until you anticipate the roof will need to be replaced.  For example, we have a roof that is expected to last another ten (10) years and replacing the roof will cost $100,000.   You must save $10,000 each year for ten (10) years.  It does not mean that in year one, you must save $100,000.  

As to the new deadlines for fully funded reserves, they are:

1. January 1, 2023.  Associations with buildings three (3) stories or greater in height must register with the Department of Condominiums, Timeshares, and Mobile Homes;
2. December 31, 2024.  Associations with buildings three (3) stories or greater in height must have their Structural Integrity Reserve Study (“SIRS”) performed; and
3. December 31, 2024.  As of this date, votes to waive or reduce reserves for those items listed in Section 718.112(2)(g), Fla. Stat. are prohibited.

All these areas are quite technical in nature, and it is recommended that you consult with professional management and competent legal counsel as required.

Michael E. Chapnick is a Florida Bar Board Certified Specialist in Condominium and Planned Unit Development Law. Mr. Chapnick has focused his entire practice on representing community associations. Learn more about Michael and how to work with him here.