By Deborah Goonan, Independent American Communities
In Florida, more than a dozen bills related to Association Governed Communities have been submitted for consideration this Legislative session. I highlighted a few of them in an earlier blog.
But on the heels of the recent Miami-Dade Grand Jury report, blasting the Department of Business and Professional Regulation (DBPR) for its ineffectiveness at reining in corruption by enforcing existing condo statutes, two new bills have been filed: HB 1237 and SB 1682.
Getting tough on condo crime?
On the surface, both bills appear to be tough on HOA board members and managers who resist providing access to association records, engage in conflicts of interest, or fail to follow condo statute election procedures. And while the intent may be to help condo owners, according to some Florida condo association attorneys, the details of both bills are not well thought out. Legal experts are squeamish about criminalizing intentional acts such as failing to provide access to association records or tampering with financial documents or election ballots.
As currently drafted, I must agree that both bills remain a bit vague as to what constitutes a violation in terms of refusing access to records or tampering with ballots or records. The bill needs to be more specific as to which actions or inactions will be considered criminal activity. However, the basic concept of taking these violations seriously is worthy of further consideration, in my opinion, especially when the industry continues to point out that association governed communities take on the role of providing some services that would otherwise fall to the local government.
So perhaps one solution is to write condo statutes that mirror the state’s laws applicable to elections and free access of public information. Why reinvent the wheel? And, while they are at it, Legislators need to enact laws that govern all types of associations, rather than completely ignoring homeowners associations.
Ironically, an increasing number of condo associations also belong to a mandatory homeowners or property owners association. But current statutes and the two proposals recently submitted, would only offer regulation of the condo association, not the master association for the planned community. That simply does not make sense.
In general, state laws need to allow for stiffer penalties for HOA, condo, and co-op association fraud, theft, and embezzlement – especially when those who perpetrate these crimes are licensed professionals such as community association managers, accountants, and attorneys.
And Florida statute should require criminal background and credit history checks for board members (at each election or term renewal) as well as any agents for the association.
With regard to curtailing conflicts of interest in condo associations, critics claim it would be inappropriate to prohibit a contractor with financial ties to a board member from working for the association. They say it is sufficient for the board member to disclose the relationship, abstain from voting on the contract, and allowing condo members to void an accepted contract after the fact.
I say why not require the board member to disclose the relationship with a potential vendor or contractor to all members prior to making a bid. Then allow members to attend a meeting where they can decide on whether or not to allow the conflicted board member to submit a bid. Let all the members have an opportunity to consider the possibility, not just board members.
Another common conflict of interest happens when management companies engage in preferred vendor and/or kickback arrangements. Why doesn’t the current proposal address management company conflicts, and specifically prohibit bill padding or bid rigging orchestrated by Florida’s licensed professionals?
I think the provisions in SB 1682 requiring better training and experience for DBPR Arbitrators is also a positive step in the right direction. However, I agree with Attorney Eric Glazer’s concern about privatization of Arbitration for the division – that would put individual owners at a disadvantage, because self-employed Arbitrators are more likely to seek repeat assignments from Association boards, whether controlled by a developer or a well-entrenched group of homeowners.
I believe both bills need to include provisions specifying proper background experience and training for DBPR staff who would investigate complaints of condo owners or agents of the condo associations serving as whistleblowers.
And most importantly, owners and residents need to know who to call and how to file formal complaints when appropriate.
Attempting to “fix” the broken condo termination process
SB 1520 was quietly submitted last week by Senator Latvala. I have written extensively about the condo termination process in Florida, and how legislative attempts to prevent owners from losing miserably on their investments have largely failed. (See reference section below)
The current bill would amend the percentage of unit owners that must vote in favor of a termination. Currently, 80% of unit owners can approve a termination of the association, as long as less than 10% of unit owners object. SB 1520 would require a 90% unit owner vote of approval for termination, with less than 5% objecting. That would offer a greater measure of protection to condo owners, and make it more difficult for an opportunistic investor to exploit condo owners.
Current law also requires that the investor make the condo unit owner “whole” upon termination – paying the unit owner at least the same amount as original purchase price, provided that owner purchased directly from the developer. SB 1520 removes the language that restricts this requirement only to the original unit owner, meaning that an owner who purchased a resale condo would also be entitled to receive a minimum of the original purchase price. Another step in the right direction.
SB 1682 and HB 1237, two bills related to Grand Jury report, intended to reduce condo crime and corruption
SB 1520 regarding condo terminations
Thoughts on the Miami-Dade Grand Jury Report:
Florida attorneys on pending condo legislation:
More information on FL condo terminations: