Florida legislation would ensure that HOAs can never expire

UPDATE: Thankfully, HB 7031 died in the Florida House in March 2016. However, it may be resubmitted for consideration in future Legislative sessions.

By Deborah Goonan, Independent American Communities

A few months ago, I told you about several Association-Governed Community (Community Association, HOA) bills filed in Florida.

As a refresher, here’s the link.

Now two additional bills have been filed, one in the Senate, and one in the House.

Today I will cover one of those bills, an amendment to the Marketable Record Title Act (MRTA), and tomorrow I will cover the other bill, the HOA Reform Bill for 2016, supported by CCFJ (Cyber Citizens for Justice).

First, a little history.

What is the MRTA?

Here’s a document that clearly explains the purpose and intent of MRTA. The entire document is well worth reading, but below are some relevant excerpts:

by Gary A. Poliakoff and Donna D. Berger

The Marketable Record Title Act (MRTA) seemed like a good idea when it was enacted by the Florida Legislature in 1963. The intent was to simplify title searches to stabilize property law …

No longer would a title examination have to search title back to the Spanish land grants. Any person having legal capacity to own land in the state, who, alone or together with the predecessor in title, was vested with any estate in land of record for 30 years or more, is deemed to have a record title to such estate and land, which shall be free and clear of all claims except the matters set forth in F.S. §712.03. An unanticipated consequence of MRTA, which apparently was not recognized by its drafters, was its impact on the covenants, conditions, and restrictions of planned developments.

Regrettably, as a consequence of MRTA, some large planned communities found themselves without the legal authority to enforce their covenants, hire managers, provide lawn maintenance and security, and/or levy assessments to maintain and operate the common areas. Communities were in shambles due to their complete inability to function. This was caused in part by the legislature’s use of broad language that extinguishes “all claims” that are at least 30 years old and that predate the root of title of the property in question.

Homeowners’ Association CC&Rs were never meant to last forever

Most CC&Rs (Covenants, Conditions and Restrictions) have been written with a 30-year expiration date. (although I have read some documents with expiration dates in 50 years)

In most cases, at the inception of the HOA or POA (Property Owners’ Association), it was anticipated that the CC&Rs and the Association itself would eventually come to an end.

At that point, CC&Rs would become unenforceable, HOAs could no longer assess property owners, and membership would become optional instead of mandatory.

Presumably, that would mean the Association would be effectively dissolved, and maintenance of common infrastructure such as roads and storm water drainage components would have to transfer to a local governing entity. Likewise, local zoning and ordinances would replace more restrictive CC&Rs.

If members were unwilling to offer sufficient voluntary contributions, non-essential common amenities such as pools or sports facilities might eventually cease to exist, assets and land being sold to private parties for better uses.

However, the HOA- industry – and local governments that benefit from not having to maintain HOA infrastructure – have a vested interest in making sure that an HOA can never die, even if homeowners no longer care to participate in membership.

 

Laws have been amended in stages to preserve HOAs as long as possible

Several MRTA amendments were thus enacted to create a method for Florida Owners’ Association to prevent its CC&Rs from expiring, as well as a method to revitalize (renew) expired CC&Rs.

 

Stage 1 – allow HOA members to vote on renewal of covenants and restrictions before they expire

In 1997, the Florida Legislature passed an amendment to statute 712, the Marketable Record Title Act, that allowed for HOAs to avoid expiration by allowing association members to vote on the matter.

As explained in this document, in order to keep the HOA alive, sometime before expiration, the association had to properly notice and hold a meeting, attain a quorum at that meeting, and then obtain votes from a majority of members to approve renewal.

If 51% of members wanted to continue the HOA, the other 49% were stuck with it.

Faced with the prospect of being unable to collect association fees and enforce various covenants and conditions of their neighborhoods, HOAs finally received a statutory mechanism to extend their CC&Rs before they were set to expire. In 1997, an amendment to F.S. §712.05 passed. In pertinent part, the statute provided: “[S]uch notice may be filed by a homeowners’ association only if the preservation of such covenant or restriction or portion of such covenant or restriction is approved by a majority vote at a meeting of the membership where a quorum is present.”

 

Stage 2 – Allow the Board of Directors to approve renewal of CC&Rs without any input from members

In 2003, however, the law was amended to allow for two-thirds of the board of directors to approve renewal of the HOA prior to expiration. No longer does this process require any input from members!

As a Florida homeowner, you do not have the right to vote on the matter of extending your Association’s documents beyond the expiration date.

This amended statute allowed homeowners’ associations to extend their community’s particular CC&Rs before they were set to expire. A later amendment to §712.05, which originated as S.B. 1410 in 2003, further refined the process for which planned developments could extend the term of their expiring CC&Rs. That amendment provided that homeowners’ associations could file a notice to preserve a covenant or restriction if that action is approved by two-thirds of the board of directors of the association at a meeting of which the members of the association are informed. Under the prior law, the preservation of the covenant or restriction required approval by a majority of the association members, at a meeting of the membership where a quorum is present. Obviously, the amendment streamlined this procedure by requiring only board approval to extend the life of the CC&Rs.

 

Stage 3 – Allow a majority of homeowners to bring back a dead HOA

In 2004, an amendment to Statute 720 (governing HOAs) was created to allow for revitalization of expired CC&Rs. In other words, a new law was created to revive an HOA that had already gone out of existence.

 

This law created a new F.S. §720.403, to encourage and allow all communities previously governed by covenants and restrictions that have expired under the application of MRTA to use a process to revive those documents. Under the new law, the preservation of extinguished CC&Rs is a two-part process. First, it requires the approval of the parcel owners of the planned development whose covenants were extinguished. Second, it requires the approval of the State of Florida Department of Community Affairs.

 

The law goes on to specify seven conditions for reviving extinguished covenants, but, for the purposes of this blog, the key provision are these:

 

In order for a residential community to be eligible to revive extinguished covenants …

1) All parcels to be governed by the revived declaration must have once been governed by a previous declaration that has ceased to govern some or all of the parcels in the community.

2) The revived declaration must be approved, in writing, by a majority of the affected parcel owners, at a meeting of the affected parcel owners, conducted in accordance with the provisions of the Homeowners’ Association Act.

 

Note that even this amendment does not require approval from 100% of affected homeowners.

 

Stage 4 – proposed legislation would create an exception for HOAs and POAs in MRTA

The current proposed amendment MRTA:

Section 2. Subsection (10) is added to section 712.03, Florida Statutes, to read: 712.03 Exceptions to marketability.—Such marketable record title shall not affect or extinguish the following rights:

(10) A covenant or restriction of a homeowners’ association or mandatory property owners’ association.

Whatever happened to property rights?

Looking at the deliberate progression of laws designed for preservation of CC&Rs, it is clear to see that the Homeowner’s Association industry has been successful in preserving its livelihood, even as it has eroded the rights of individual property owners.

Not only does an Association-Governed Residential Community create restrictions upon individual property rights, it also creates virtually unlimited financial liability in the form of assessments and the perpetual threat of a lien on one’s home.

A buyer must go to great lengths to locate and purchase a home that is not governed by an Association – a rare commodity in the state of Florida. Why should a majority of your neighbors later be able to impose mandatory HOA membership upon you, just because, at one time, a mandatory HOA used to exist? This is the current state of affairs in Florida.

Even worse, why should the law allow for perpetual CC&Rs that can never expire?

For all the industry attorneys that frequently argue that CC&Rs are “contracts” and that the government has no right to interfere with that contract, I have a question for you:

Why is it suddenly desirable to ignore key provisions of CC&Rs “contracts” that you do not happen to like – namely, expiration provisions?

 

 

 

References:

New Bills Impacting Homeowners’ Associations Filed for 2016 Legislative Session (Legal summary)

 

 

Read and track the MRTA bill:

https://www.flsenate.gov/Session/Bill/2016/7031/BillText/Filed/PDF

https://www.flsenate.gov/Session/Bill/2016/7031