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HB 319 is the primary condominium bill this session. It is neither anti-association nor pro-bank as some of its critics have said. In fact, it is one of the most pro-association bills we have seen in recent years. It protects associations from predatory collection agencies which are trying to take advantage of an association’s wish to be repaid fully once the foreclosure process is complete.  

Ask yourself one simple question to determine if HB 319 is pro or anti association: if the Legislature is going to increase a bank’s liability to an association, should the increased funds go to pay legal fees or go to reimburse the community for unpaid assessments?  In our view, any additional payments by made by banks MUST go back to the association.

Collection agency attorneys should not be incentivized to aggressively go after banks if the associations could be left with a large debt payable to the attorneys. We recently saw such a case where the collection attorney was demanding almost $14,000.00 to finalize the sale of a foreclosed unit.  The purchaser was left without any good choices. One option is to pay the fees (which is what the “aggressive” firms have counted on).  Another option is to go to court which can also be costly.  Another alternative is to simply cancel the deal – defeating the whole purpose.

Let's address the real problem by making the banks foreclose more quickly and pay the assessments due to the association, not by creating more financial opportunities for collection mill attorneys.

I have structured a Q&A below with the hope that it will better explain the real purpose of the bill and the problems that the bill is trying to fix.

Q:  What is the “safe harbor” provision?

A:  The “safe harbor” provision in the law means that when a bank takes title to a unit as a result of foreclosure, the bank is obligated to pay either 12 months of unpaid assessments or 1 percent of the original mortgage debt, whichever is less.  For example, if a condominium’s annual assessments are $3600, and the unit has a $250,000 mortgage, the bank will pay to the association $2,500.  The safe harbor provision has been in the law since 1992. Prior to 1992, a bank that took title to a unit through a foreclosure action paid the association ZERO in past due assessments. 

Q:  Do banks owe the association’s attorney’s fees and costs, in addition to the safe harbor amount?

A:  No.  There is no mention in the statute of other charges, such as attorney’s fees, becoming a bank liability after the foreclosure of the bank’s mortgage.  The vast majority of attorneys who practice community association law interpret the law to mean that the bank does not owe any additional amounts above the safe harbor amount.

Q: How does HB 319 affect the safe harbor provisions?

A:  HB 319 simply clarifies the law that has been in effect for 20 years so that it specifically states that the bank is responsible for 12 months past due assessments or 1% of the original mortgage debt, whichever is less, and does not have to pay unlimited attorney’s fees and costs above the safe harbor amount. 
 
Q:  Why is it necessary to clarify the safe harbor provisions?  Why not leave the law as is?

A:  There was never any uncertainty in the law until recently, when a cottage industry of collection agencies and collection lawyers, with no history of helping associations, came onto the scene and began to interpret the law differently.  This cottage industry (some refer to them as collection mills) claim that their interpretation of the statute is merely “aggressive” and they are willing to take liberties with their demands against first mortgagees that take title to condominium units.  So for example, if an association’s annual assessments total $3,600 and the amount of the loan was $250,000, rather than making a demand for $2,500, these firms and collection agencies have demanded outrageous sums of thousands of dollars, ten thousand dollars, fifteen thousand dollars and even more for routine mortgage foreclosure cases.   It is easy to see why these collection mills do not want HB 319 to clarify the safe harbor amount and are misleading the public into thinking that HB 319 is anti-association and pro-bank.  
 
Q:  Why not leave the law as is and let these collection mills try to get as much money as they can from the banks?

A:  Associations are being harmed, every day, by these predatory practices.  For example, when a lender does foreclose and looks for a new buyer for the home the parties must ask the association for an “estoppel letter”, which is a legally binding request for the association to state how much must be paid for the issuance of a clear title.  Although the bank has often already paid the safe harbor amount, the parties ready to close the deal (buyer, seller, lender, attorneys, realtors, and title companies) are all shocked to learn that demand is being made against them on behalf of an association for outrageous sums.  We recently saw one case where the collection attorney was demanding some $14,000.00.  When faced with a scenario like this, the choices are all bad.  One option is to pay the money, and that is what many of the “aggressive” firms have counted on.  Another option is to insist that the law be followed and go to court.  This is usually not a good economic choice for the parties.  Another alternative is to simply cancel the deal, which is happening more and more frequently.  In other cases, the lenders will pay, and then file lawsuits for refunds. 

Q:  What other problems are being caused by the “aggressive” interpretation of the law by the collection mills?

A:  Similar practices in Nevada led a subsidiary of Bank of America to file a class action lawsuit regarding collection practices in homeowners’ associations.  According to recent news reports, a couple of hundred Nevada associations have also recently been named as defendants in a new wave of class action lawsuits.  It is only a matter of time before a similar class action lawsuit is filed in Florida unless the Legislature acts to clarify the law.

Q:  Why not change the law so that banks have to pay the attorneys fees and costs, in addition to the safe harbor?

A:  We think the banks should be paying more, but if there is going to be a change in the law, it should be in the safe harbor amount (for example, 24 months or 2% instead of the current 12 months or 1%) so that we can be sure that the additional money paid by the banks is going to the associations and not to lawyers and collection agencies.  In addition, if the law is changed to require the banks to pay attorneys fees and costs in addition to the safe harbor amount, it would ignore the purpose of the original safe harbor law, which was so that a bank lending money would know upfront how much it would have to pay to the association if the borrower stopped paying his or her mortgage and the bank had to foreclose.   If the law was to be changed to say that the banks had to pay unlimited amounts of attorney’s fees and costs, the lending industry may decide to curtail borrowing in Florida or make it much more expensive to obtain a loan.

Q:  What is the Legislature doing to help associations?

A:  I believe that HB 319 helps associations by clarifying the safe harbor provision which will curtail the abuses explained in these Q&A’s.  In addition, there are a couple of bills pending in the Legislature (HB 213 and SB 1890) which will give associations more control over speeding up stalled foreclosure cases.  The greatest problem for associations is that the foreclosure actions drag on far too long.  Associations need to have these units sold, and a new owner holding title, so that the new owner can begin to pay assessments to the association.  Therefore, I would strongly urge you to contact your Legislator and ask them to support HB 319 and HB 213/SB 1890.

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It is very likely that your management company charges a fee to delinquent owners if they send collection letters or take other action to collect a delinquent assessment. After all, they are doing extra work that wouldn’t be necessary if the owner paid on time.

There is no mention of these management collection fees in the statutes governing Florida community associations. The association is entitled to collect interest on the delinquency by statute – interest is specifically addressed. It can charge late fees (if allowed by the governing documents) to the owner. Late fees are specifically authorized by the statutes. It can pass along the attorney fees and costs too, as those fees and costs are specifically mentioned in the statutes.

If the associations have to ask their management firms to collect assessments, why doesn’t the statute specifically allow associations to pass through those fees on to owners?

We have tried to do exactly that for many years. If you look at the legislative history for the 2010 legislative session, there were attempts to get these management or collection agency fees added to SB 1196. However, it was only added to the Cooperative Act (Chapter 719). The law for cooperatives said:

"The association has a lien on each cooperative parcel for any unpaid rents and assessments, plus interest, any authorized administrative late fees, and any reasonable costs for collection services for which the association has contracted against the unit owner of the cooperative parcel."

If that highlighted language was included in the Condominium Act (Chapter 718) and the Homeowners’ Associations Act (Chapter 720), then associations would specifically have the right to add management fees to their liens against owners. Isn’t that fair?

Well, since it said ‘reasonable costs’, some organizations claimed management companies and collection agencies would abuse this statute and charge outrageous amounts to unit owners. The term "reasonable costs" is broad. Arguably there is room for abuse. In fact, we see this all the time when it comes to estoppel fees. The statute says the charge for an estoppel certificate must be “reasonable”. Some places have a $100 fee, some have a $200 fee, some have a $400 fee – all of which are claimed to be “reasonable”. I heard of one company charging more than $500 as an estoppel fee. Obviously, there is a lot of room when you use the term “reasonable”.

So in light of those arguments, language limiting the collection fee to $150 was proposed to be added to the shared ownership statutes. CALL supported that effort. A number of management companies supported that effort. But there was still opposition, so Sen. Fasano came up with alternative language in his companion bill, SB 530, to provide as follows:

468.439 Collection services.-Collection services expenses that are reasonably related to the collection of a delinquent account rendered by a community association manager or management firm on behalf of a community association governed by chapter 617, 718, 719, 720, 721, or 723 may be secured by the filing of a claim of lien on behalf of the community association if the collection services expense is specified by amount in a written agreement with that community association manager or management firm and payable to the community association manager or management firm as a liquidated sum.

If you look at the CS 3 version of SB 530, you will see this language in the bill. However, the Legislature passed HB 1195, and not SB 530. CALL advocated for adding this language to HB 1195 (which is now the 2011 statutes). The position of some of the members of the Legislature was that this was an additional "fee" and they were opposed to any new fees. Since the ability to collect these fees wasn’t added to HB 1195, we still don’t have any specific authority in the laws to charge and collect these fees from owners.

So fast forward to 2012, and CALL is still advocating for some language that will allow associations to add collection costs to the lien. We have always supported that, but the opposition remains to any type of new fee. One of the suggestions that has been made to address this issue involves allowing associations to collect an increased late fee in order to recoup the costs that the management companies charge for the collection services. Currently, the law allows associations to collect a late fee of the greater of $25 or 5% of each installment for each delinquent installment, but only if authorized by the declaration or bylaws. If this amount was increased and if all associations were allowed to collect this amount, it would appear to be sufficient to recoup the costs of collection. This is the approach favored by some members of the Legislature, including the sponsor of HB 319, and CALL assisted in drafting the language.

So, long story short, the issue of management collection fees being added to the association's lien is still being debated. We are advocating for something to be done. Otherwise, there will continue to be no authority in the statutes for these fees and unscrupulous management firms and collection agencies will continue to charge unlimited amounts.

So I ask you, community leaders, don’t you want the Legislature to address this issue and allow associations to recoup the cost of collection, as long as the amount is limited to prevent abuse?

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We are pleased to announce that this year’s large community association bill, HB 1195, which previously passed out of the Legislature was formally signed into law yesterday by Governor Rick Scott. The effective date of HB 1195 is July 1, 2011.  You can view the full text of HB 1195 by accessing the CALL website (www.callbp.com). 

CALL has also prepared a comprehensive summary of HB 1195 and several other important bills that impact community associations. [PDF]

CALL worked closely with the sponsors of HB 1195 over the past year to ensure the best possible result for community associations. 

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As previously addressed in our prior CALL Alerts, many portions of SB 530 (the “glitch” bill) were primarily drafted by CALL, at the request of members of the Legislature, to clear up some of the confusion that arose from SB 1196 (the 2010 community association bill that became law). SB 530 was originally accompanied by HB 1035, and later by HB 1195. We are pleased to announce that HB 1195 passed out of the Legislature today and will now be sent to the Governor for action. We have no reason to believe the Governor will veto the bill, but final confirmation normally takes a matter of 3 or 4 weeks. We will keep you posted.

Here is a summary of the issues CALL worked on and drafted language for which are contained within this bill:

Official Records (Condominiums and HOAs)

• Will clarify that owners are permitted to consent in writing to the disclosure of their protected contact information.
• Will clarify that although personnel records are not available for inspection by owners, the owners will be permitted to inspect employment agreements and budgetary and financial records that indicate the compensation paid to employees.

Open Meetings (Condominiums)

• Will permit condominium boards the right to hold closed meetings (not open to unit owner observation) for “personnel” matters. Legal counsel need not be present. (This is already the law in the homeowners’ association context.)

Attachment of Rents (Condominiums, Cooperatives and HOAs)

• Will clarify that “future monetary obligations” includes all rent due from the tenant to the unit or parcel owner and must be paid to the association until all delinquent accounts are paid in full.

Director Certification (Condominiums)

• Will provide that condominium association directors may submit proof of educational course attendance (in lieu of signing the certification form) and such course must have been completed within 1 year before or 90 days after the date of the election or appointment.
• The written certification is valid as long as the director serves on the board without interruption.

Suspensions (Condominiums, Cooperatives, HOAs)

• Will allow suspension of common element use rights for non-payment (no hearing is required) and for bad acts (hearing is required).
• Will clarify that if voting rights are suspended, the suspended vote will not count towards quorum or vote required to approve an action.
• Suspensions for non-payment will not require hearing, but will require board approval at properly noticed meeting.
• The Bill also contains some provisions that were primarily advocated through other constituents and groups:

Collection of Rent from Tenants (Condominiums, Cooperatives, HOAs)

• Will provide a form letter to be sent to tenants explaining the tenant’s obligation to pay rent to the association.
• Will provide tenant with immunity from any claim by the landlord related to the rent timely paid to the association after the association has made written demand.

Elections and Staggered Terms (Condominiums)

• Will clarify that board member terms do not expire at the annual meeting if all of the member terms would expire at the annual meeting but there are no candidates.
• In those cases where the board member terms expire at the annual meeting, the board members may stand for reelection unless prohibited by the bylaws. (This suggests that term limits may be permitted, if provided in the bylaws).
• Will clarify that a candidate must be eligible to serve on the board at the time of the deadline for submitting a notice of intent (i.e., 40 days before the election) in order for his or her name to be listed as a proper candidate on the election ballot or to serve on the board.

Termination (Condominiums)

• Will provide for “partial” termination of condominiums and that amendments providing for same are not subject to s. 718.110(4).
• Plan of termination in a partial termination must reflect the remaining interests in the non-terminated portion of the condominium.
• Modifies distribution protocol and mortgagee participation to reflect partial termination.
• Will allow for termination because of economic waste or impossibility if a condominium includes units and timeshare estates where the improvements have been totally destroyed or demolished. Will require a plan of termination be filed in court by a unit owner seeking equitable relief.

Membership Agreements (Condominiums)

• Will provide for association acquiring membership agreements by vote of a majority of entire voting interests instead of reference to declaration and s. 718.113(2).

Management Fee Collection (Cooperatives)

• Will remove provision from 2010 statute allowing cooperative associations to lien for collection services for which the association has contracted.

Homeowners’ Associations/Bulk Television/Internet/Information (HOAs)

• Will create s. 720.309(2) to basically mirror condominium statute, as amended in 2010, regarding bulk purchase of information or internet services.
• Will prohibit homeowners’ associations from denying individual service to any resident from certificated or franchised provider.

Bulk Buyers/Bulk Assignees (Condominiums)

• Will amend definition of “bulk assignee” and “bulk buyer” to mean a person who acquires more than 7 condominium parcels in “a single condominium.”
• Will provide that bulk assignee is not liable for warranties under 718.203(1) or 718.618, except “as expressly provided by the bulk assignee in a prospectus or offering circular, or the contract for purchase and sale executed with a purchaser,” or for design, construction, development or repair work performed by or on behalf of the bulk assignee.
• Will provide that if, at the time the bulk assignee acquires title to the units and receives an assignment of developer rights, the developer has not relinquished control of the board, for purposes of determining the timing of transfer of control, a condominium parcel acquired by the bulk assignee is not deemed to be conveyed to a purchaser, or owned by an owner other than the developer, until the condominium parcel is conveyed to an owner who is not a bulk assignee.
• Will require filing with the division and certain disclosures to purchasers and lessees if bulk assignee or bulk buyer is offering “more than seven units in a single condominium” for sale or for lease for a term exceeding 5 years.
• Will provide that bulk assignee or bulk buyer are not required to comply with the filing or disclosure requirements if all of the units owned by the bulk assignee or bulk buyer are offered and conveyed to a single purchaser in a single transaction.
• Will provide that a person acquiring condominium parcels may not be classified as a bulk assignee or bulk buyer unless the condominium parcels were acquired on or after July 1, 2010, but before July 1, 2012.

Homeowners’ Association Board of Directors Eligibility and Meetings (HOAs)

• Will carry over the provisions in the Condominium Act regarding board eligibility. A person delinquent in the payment of any monetary obligation to the association for more than ninety (90) days, and convicted felons will not be eligible to serve on the board.
• Will allow members of a homeowners’ association to speak at meetings of the board with reference to all designated agenda items, and will no longer require a petition of the voting interests to speak at a board meeting.

Manual Fire Alarms (Condominiums and Cooperatives)

• Will clarify that a condominium, cooperative or multi-family residential building that is less than four stories in height and has an exterior corridor providing a means of egress is exempt from installing a manual fire alarm system. This corrects the glitch from last year when two different bills adopted different language. One bill referred to buildings less than four stories in height, and another bill referred to condominiums one or two stories in height.

Hurricane Protection (Condominiums)

• Will clarify that an association is permitted to install impact glass or other code compliant windows as hurricane protection.

Joint and Several Liability (Condominiums and HOAs)

• Will provide that an association that acquires title to a unit through foreclosure is not liable for unpaid assessments that came due before the association’s acquisition of title in favor of any other condominium association or homeowners’ association which holds a superior interest on the unit.

We will notify you as soon as Governor Scott takes action on this Bill. In the meantime, we encourage all of our CALL members to contact the Governor and urge him to sign HB 1195 into law. Governor Scott’s contact information is listed below:

Governor Rick Scott
Phone: (850) 488-7146
Fax: (850) 487-0801
Email: rick.scott@eog.myflorida.com

Very truly yours,

Yeline Goin and David Muller, Co-Executive Directors
Community Association Leadership Lobby (CALL)

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SB 530 / HB 1195, the community association “glitch” bill, was voted on by the House of Representatives on Friday, April 29, 2011.  We are pleased to inform you that the bill passed in the House by a vote of 113-1.   As advised, CALL has been actively involved in all aspects of working this bill through the legislative process, which will provide many positive changes for community associations throughout Florida, including the following, if it ultimately becomes law:

• Allows owners to consent in writing to the disclosure of certain protected information (e.g. e-mail address, out-of-state address, etc.);
• Clarifies the hearing and notice requirements regarding the suspension of use rights and the adoption of fines;
• Clarifies the board certification requirements for condominium association directors; and
   
• Clarifies that an association may collect all subsequent rental payments from a tenant to pay for delinquent assessments.  

A copy of the latest engrossed version of HB 1195 has been uploaded to the CALL website (www.callbp.com) for your review.  HB 1195 is the companion bill to SB 530, which is still being addressed by the Senate.

SB 530 / HB 1195 is now being sent to the Senate for consideration.  We will continue to keep you updated with further developments regarding the status of the glitch bill.  CALL is continuing our efforts to improve and clarify the language contained within the glitch bill.  With the Legislative Session scheduled to end on May 6, CALL anticipates the Senate will act on the legislation (SB 530/HB 1195) in the next few days.  As soon as the Senate votes on the bill, we will notify you and will provide you with a detailed summary regarding the final language contained within the bill.

Sincerely,

Yeline Goin and David Muller, Co-Executive Directors
Community Association Leadership Lobby (CALL)

Please visit our "CALL" Website at www.callbp.com  to view the full text of the bills "CALL" is tracking.

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The Community Association Leadership Lobby (CALL) Announced Last Week it is Working on a 'Glich' Bill to Clarify Several Community Association Rights and Remedies.

The purpose of the CALL bill is to make proposed changes to Chapters 718, 719 and 720, Florida Statutes to address certain “glitches” resulting from SB 1196.  Co-Executive Directors Yeline Goin and David Muller explained that any large piece of legislation is likely to have unintended consequences and need further clarification.
 

So far, the CALL bill proposes many important legislative items, such as:

• Allowing condo boards to meet in private to discuss personnel matters just like HOA boards;
• Allowing condos and HOAs to collect management company collection charges from delinquent owners and clarify the parameters of action on the part of management;
• Ensuring that rent collected from a tenant is applied to the oldest balance on the unit owner's account; and
• Ending any argument that cable or television programming is a “utility service” - authorizing immediate suspension when a unit owner is more than 90 days delinquent. 

The CALL team always entertains comment from its members.  If you are a member or would like more information, please visit www.callbp.com or email call@becker-poliakoff.com.
 

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First, a quick note of introduction. As stated above, my name is Travis Moore and for the last number of years I have had the privilege of advocating for the interests of CALL members before Florida's policy makers. This includes the Governor's Office and Executive Branch Agencies such as the Department of Business and Regulation which is charged with condominium oversight and the state Legislature. While decisions are being made in Tallahassee and around the state, it is vitally important the voice of each CALL member is heard by those holding sway over the deliberations. I am pleased to be a part of your team by pointing your megaphone in the most effective direction and being your eyes and ears as the debate affecting our community takes place.

Probably THE hot button issue facing community associations in Florida is mortgage foreclosures and the statutory limit of lender liability for assessments. The association is left maintaining the asset  - the burden on the backs of the units not in foreclosure, but many sliding that way. This added burden is just buttering the slope.

Up until recently, the lending lobby has offered no workable solutions. Now, they are circulating draft legislation creating a non-judicial foreclosure process. To date, no bill has been filed but we suspect it will and CALL will quickly analyze it and get it circulated for your input. Already, we are reviewing the draft so be looking for a CALL Alert soon.

As in any proposal to address this true crisis for associations, there are certain criteria which we will insist on. Obviously it must address the associations' ability to have owners and lenders meet their financial obligations to the association. What is rightfully owed to the association for maintaining the real estate must be paid.  It must be paid as quickly as possible. One of the main issues currently being faced by associations is the length of time it is taking for the property to be foreclosed, while the hard cap of 6 months (COA) and 12 months (HOA) is keeping the lenders' liability unreasonably low. 

It is imperative that any foreclosure process, including a non-judicial one, not put the entire process and timetable under the control of the lender.  The lenders have the most to gain by delay...a cap and avoidance of paying full assessments upon taking title...while leaving associations even further at their "mercy."

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A couple of CA bills of interest were heard by the House Civil Justice & Courts Policy Committee on Tuesday (February 4, 2010) morning. HB 329 by Rep. Robaina was debated and it was decided by the Committee to hold off on taking a vote due to some concerns with the provisions pertaining to the ability of associations to go after payment of assessments from renters when unit owner landlords aren’t paying.

HB 561, a omnibus CA bill which CALL is working on very closely with sponsors Bogdanoff and Hudson, was passed by the committee after adopting several amendments pertaining to the contentious sprinkler retrofit issue. It would move the date of compliance to 2019 from 2014 and say that if an association has voted to forego retrofitting that 10 percent of owners could petition to have a special meeting “re-vote” once every 3 years. CALL will continue to monitor this issue to make certain a workable solution is found which doesn’t jeopardize the bill.

There was also a discussion on the Florida Supreme Court’s administrative order re the mandatory mediation process for residential mortgage foreclosure cases. David Muller of CALL was asked by the Committee to testify and was able to provide helpful information on the foreclosure crisis many associations are facing and how this mediation process must not cause further delay and cost. This issue remains a top priority of CALL. We need you to let your Legislators know how your association is being impacted and ask for action.

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SB 714 Most Significant Change for Community Associations.   Community Association Leadership Lobby (CALL) summarizes changes resulting from SB 714.

While there were a number of bills filed and debated this legislative session, not many of them passed.  SB 714, filed by Senator Jones, modifies the insurance provisions of the Condominium Act, extends the deadline for high-rise fire safety retrofits, clarifies board eligibility issues and repeals a law requiring an alternate power source for elevators under certain circumstances.   As of the date of this post the bill has not been signed into law.  Some of the changes include:

Insurance:

• Condominium Unit insurance policies (“HO-6”) issued or renewed after July 1, 2009 will include at least $2,000.00 loss assessment coverage. 
• F.S. 718.111(11) now refers  to “property” insurance instead of  “hazard” insurance. 
• Removes some of the detail required in the notice of the board meeting to set the insurance deductible for the master policy.
• Removes the requirement for each condominium unit owner to purchase contents (HO-6) coverage
• Removes the requirement to name the Association as a loss payee and an additional insured on HO-6 policies issued to condominium unit owners.

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