by Deborah Goonan, Independent American Communities
Construction Defects debate heats up, but is compromise possible?
A new compromise bill has been introduced in the House, in the hopes that Colorado legislators can finally address the state’s highly controversial construction defect laws pertaining to common interest, association-governed communities.
In past blogs, I have criticized the concept of requiring a membership vote on the decision of whether or not an Association should sue a developer in an attempt to recover damages due to construction defects. One of my main concerns is that, since votes attach to the property, not the person, an association with a significant number of developer (or affiliate) owned units could easily block any attempt by affected owners to move forward with litigation.
HB 1279 attempts to address that concern by excluding votes from developer and affiliate-owned units, bank-owned units, and “units owned by owners who are deemed nonresponsive” to the request for a vote. The statute goes on to define nonresponsive. In effect, a membership vote would only count votes of actively engaged unit owners with no connection to the developer. In my opinion, this is a step in the right direction.
Although requiring a membership vote for construction defect litigation could still be impractical, because unit owners are not privy to legal strategy that could sway their decision one way or the other, HB 1279 has the advantage of providing at least basic information about the risks and benefits of pursuing a lawsuit against the developer, as opposed to engaging in Arbitration or another out-of-court settlement.
Lawmakers introduce bipartisan compromise bill to tackle construction defects issues
Where to track HB 1279:
HB 1279, full text
III) Vote count – exclusions. FOR PURPOSES OF CALCULATING 18 THE REQUIRED MAJORITY VOTE UNDER THIS SUBSECTION (1)(d) ONLY, THE FOLLOWING VOTES ARE EXCLUDED:
(A) ANY VOTES ALLOCATED TO UNITS OWNED BY A DEVELOPMENT PARTY. AS USED IN THIS SUBSECTION (1)(d)(III)(A), “DEVELOPMENT PARTY” MEANS A CONTRACTOR, SUBCONTRACTOR, DEVELOPER, OR BUILDER RESPONSIBLE FOR ANY PART OF THE DESIGN, CONSTRUCTION, OR REPAIR OF ANY PORTION OF THE COMMON INTEREST COMMUNITY AND ANY OF THAT PARTY’S AFFILIATES.
(B) ANY VOTES ALLOCATED TO UNITS OWNED BY BANKING INSTITUTIONS;
(C) ANY VOTES ALLOCATED TO UNITS OF A PRODUCT TYPE IN WHICH NO DEFECTS ARE ALLEGED, IN A COMMON INTEREST COMMUNITY WHOSE DECLARATION PROVIDES THAT COMMON EXPENSE LIABILITIES ARE 4 NOT SHARED BETWEEN THE PRODUCT TYPES.
(D) ANY VOTES ALLOCATED TO UNITS OWNED BY OWNERS WHO ARE DEEMED NONRESPONSIVE….
More articles on this controversial subject:
Grantham: Don’t call new construction defects bill a ‘compromise’
Homeowner consent bill introduced in House as latest salvo in construction defects battle
Bill would require consent of individual condo be obtained before suit filed
Bills aim to crack down on corruption in condominium associations
The hottest legislative news in the Sunshine State right now: two companion bills that are intended to reduce condo crime and corruption, while increasing transparency and accountability of condo associations. Both bills are advancing through committee with minor amendments to the House version.
Both bills have been drafted in response to widespread public outrage by condominium owners, and following a scathing Miami-Dade Grand Jury report that blasted Florida’s Department of Business and Professional Regulations (DBPR) for its ineffectiveness in assisting condo owners. The report concluded that DBPR lacked legislative authority to take appropriate action, and that its staff members lack the skills to competently investigate complaints and allegations of corruption.
It is important to note that both of these bills apply to condominium associations only, and would not be applicable to single family homeowner associations, including master associations in planned communities.
Recent article on the subject:
Miami-Dade-backed condo law reforms advance in Legislature
Notice that attorney advocacy groups representing HOAs in Florida oppose this bill, as well as some others.
Condo Criminal Penalties Bills, Fire Sprinkler Bill, and Estoppel Bill to be Heard in Committee this Week; New HOA Rental Bill—CALL Alert for March 20, 2017
Read and track HB 1237:
Excerpt of summary for HB 1237:
A condominium is a form of real property ownership comprised of units that are individually owned and have an undivided share of access to common areas and a corresponding duty to pay assessments to fund the maintenance and repair of the common areas. Condominium associations are regulated by the Department of Business and Professional Regulation (DBPR). Significantly, the bill amends current law relating to condominiums to:
Prohibit contracts between the association and any company related to an officer or director;
Require retention of bids for materials, equipment or services in an association’s official records;
Allow a tenant the right of inspection of an association’s bylaws and rules;
Create misdemeanor criminal penalties for persistent denial of access to official records;
Require an association of 500 or more units to create a website for access to association records;
Require an association to provide a copy of the most recent financial report upon written request from a unit owner;
Penalize an association that does not provide a financial report to an owner when requested by DBPR to do so;
Create a term limit of 8 years applicable to board members who serve 2-year terms;
Require a recalled board member to immediately abandon office and return association property and records;
Require DBPR to certify arbitrators and set time requirements on conducting a hearing and rendering a decision;
Create felony criminal penalties for fraudulent voting activities in association elections;
Heighten the requirements for the suspension of a member’s ability to vote in association elections;
Authorize the Condominium Ombudsman to review of secret ballots cast at an association vote when looking for misconduct; and
Require the association to report to DBPR the names of all financial institutions with which the association maintains accounts, which list may be obtained by any association member upon written request.
Read and track SB 1682:
Condo termination law amendments quietly progressing in the House, Senate version of the bill has been assigned to committee.
The House version, HB 7055, would retain the industry standard of 80% vote of approval for termination of a condominium. However the bill would offer more protections for minority condo owners who object to an optional termination proposal.
For example, HB 7055 would reduce the percentage of non-consenting owners (who object to the termination) that could delay or stop a termination from 10% to 5%.
The bill also expands provisions intended to make minority condo owners whole upon termination. Current law requires an investor pursuing condo termination to pay at least the purchase price to unit owners who originally purchased their condo units from the developer, and only if they use the unit as their primary residence eligible for a Florida homestead exemption. HB 7055 would partially correct inequities by including resale buyers, although, the requirement for homestead status would remain as is.
After a termination agreement has been approved by unit owners, it would be subject to DBPR review and approval, to ensure that all disclosure and technical requirements are met. The bill also allocates $85,000 to cover the cost of one additional DBPR staff member for this purpose.
Although Florida Legislation would still allow for optional condo termination, HB 7055 and its companion bill SB 1520 increase consumer protections for condominium owners opposed to a termination plan.
Read and track HB 7055
Read and track SB 1520