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FL Division of Condos Proposes Greater Financial Penalties on Associations

Florida condominiums, cooperatives and, to a lesser degree, homeowners’ associations are subject to the imposition of fines and penalties by the Division of Florida Condominiums, Timeshare and Mobile Homes (“Division”) for a variety of mistakes and missteps.  The Division plans to pass sweeping changes to Chapter 61B-21 of the Florida Administrative Code which may go into effect in the coming weeks.

Why is this important for your Board to know?  Because many of the actions listed below occur on a regular basis in many associations that can otherwise be described as high functioning communities.

The category of minor violations has been narrowed while the category of more egregious violations has been expanded. The following violations are considered minor violations for which a Notice of Noncompliance will be issued:

  • Failing to disclose the beginning and ending dates of the period covered by the proposed budget.
  • Failing to disclose periodic assessments for each unit type in the proposed budget.
  • Distributing candidate information sheets consisting of more than one page.
  • Verifying the outer envelope information BEFORE the date of the election.
  • Failing to disclose the amount required to fully fund each reserve account as of the end of the fiscal period covered by the annual financial statements.
  • Failing to disclose the method of allocating income and expenses in the annual financial statements or turnover audit.

The following violations will result in a MINIMUM total penalty of $10-$30 PER UNIT or $1,000 whichever amount is greater. In a high rise with 350 units, a penalty for one of the following violations could cost $10,500.  As you can see, some of the violations below are much more egregious than others.

  • Failing to maintain complete accounting records.
  • Failing to maintain separate accounting records for each condominium.
  • Not passing assessments sufficient to meet expenses.
  • Collecting assessments less frequently than quarterly.
  • Not apportioning assessments correctly amongst multiple condominiums.
  • Failing to charge interest on past-due assessments.
  • Improperly excusing the developer or other owners from paying assessments.
  • Improperly amending the Declaration of Condominium to change the percentage by which the unit owners share the common expenses.
  • Imposing improper use fees.
  • Imposing late fees, transfer fees or security deposits without proper documentary authority to do so.
  • Failing to maintain adequate fidelity bonding.
  • Compensating board members or officers without proper documentary authority to do so.
  • Improperly allocating reserve requirements.
  • Failing to include a separate budget for each condominium operated by the Association as well as a budget for the Association.
  • Failing to obtain competitive bids fore each contract that exceeds 5% of the association’s budget.
  • Imposing fines and suspending use rights without proper notice and an opportunity for a hearing.
  • Allowing an ineligible person to fun for the Board.
  • Failing to adopt a budget each year.
  • Commingling reserve funds with operating funds.
  • Using Association funds for items other than proper common expenses.
  • Contracting with a service provider owned by a board member.
  • Using an association debit card for any association expenditure.
  • Failing to hold an annual election. The caveat here is that if you do not have more candidates running than open seats or if you do not have at least 20% of your eligible voters cast a ballot you will not have an election.
  • Failing to use ballots or voting machines.
  • Failing to provide space for the name, unit number or signature of the outer envelope used for elections.
  • Failing to provide timely first and second notices of the election.
  • Using improper nomination procedures in the election.
  • Holding the election at a time and place other than the annul meeting.
  • Failing to provide a candidate with a receipt for written notice of his or her candidacy.
  • Permitting ineligible candidates to be listed on the ballot.
  • Allowing members to rescind or change their previously cast election ballots.
  • Including comments from the board about election candidates in the Second Notice of Election and accompanying documents.
  • Not using an impartial committee to count the ballots.
  • Altering or editing candidate information sheets. The caveat here is that if a candidate submits a double-sided candidate information sheet or a candidate information sheet that is more than one page long, that candidate must be told that only one side of a page will be distributed.
  • Failing to place the inner envelope in a separate receptacle before being opened.
  • Not using uniform ballots.
  • Not checking the outer envelopes against a list of eligible voters.
  • Counting ineligible ballots
  • Failing to count properly cast ballots.
  • Opening outer envelopes prior to the election meeting or opening outer envelopes outside the presence of unit owners.
  • Failing to maintain official records.
  • Requiring a unit owner to pay a fee for access to association records.
  • Failing to timely provide access to records or failing to allow scanning or copying of records.
  • Improperly purchasing a unit at a foreclosure sale.

The foregoing list of violations is not inclusive and, in addition to the penalties established by the rule chapter, the Division may also seek to recover any other costs, penalties, attorney’s fees, court costs, service fees, collection costs and damages allowed by law. . There are a lot of other areas where a volunteer board can unknowingly go astray and wind up being monetarily penalized as a result. The changes being proposed by the Division to 61B-21.003 F.A.C reflect a shift in the Division’s focus from education to enforcement. While both are important, education helps boards avoid the types of infractions which result in fines and penalties.

The Division has posted notice of a Public Meeting/Workshop Hearing for Monday, August 13th from 9:30-11:30 am in Tallahassee. I realize that most of you reading this blog are not likely to make it up to Tallahassee for this hearing.  However, you can submit a comment regarding the proposed rules by sending an email to the following email address which has been set up for this purpose:

fctmh.rulehearing@myfloridalicense.com

The imposition of fines against associations will have a financial impact and may result in the community looking for ways to hold individual board members accountable for the costs to the association. Do not expect insurance to cover fines or penalties.  Given these new enforcement parameters, I am urging associations to consult with their management professionals and experienced legal counsel to ensure that they are operating within the requirements of the Statute and Administrative Code.  Particular attention should be paid to fiscal operations (budgeting, calculating and handling of reserves, collection of assessments), imposing fees of any kind other than assessments, elections and board member conduct and the awarding of contracts.  Serving on your board of directors is almost guaranteed to be a thankless job but you should try to avoid it also becoming a costly job!

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