Annual Reporting by Associations

The annual financial reports your association is required to prepare depends on the total annual revenue generated from all sources.  This is also known as the total income and should be easily identified on the annual budget which the association is required to prepare and provide to owners.  There is no requirement all associations submit to audits.

For Homeowner Associations, Fla. Stat. 720.303(7)(a) provides: 

1. An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare compiled financial statements. 

2. An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare reviewed financial statements. 

3. An association with total annual revenues of $400,000 or more shall prepare audited financial statements. 

Fla. Stat. 720.303(7)(b) provides: 

1. An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures. 

2. An association in a community of fewer than 50 parcels, regardless of the association’s annual revenues, may prepare a report of cash receipts and expenditures in lieu of financial statements required by paragraph (a) unless the governing documents provide otherwise. 

For condominium associations, Fla. Stat. 718.111(13)(a) provides:

1. An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare compiled financial statements.

2. An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare reviewed financial statements.

3. An association with total annual revenues of $400,000 or more shall prepare audited financial statements.

Fla. Stat. 718.111(13)(a) provides:

1. An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.

2. An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures in lieu of financial statements required by paragraph (a).

Stand Your Ground Law Abused Again

I think our legislators in Florida need to review the Stand Your Ground Law. I doubt they were thinking of HOA drama when they passed the bill, but we are about to have another Trayvon Martin issue.

I represent a client in a voluntary HOA. They refused to admit they were voluntary until I stepped in to represent the client. Another homeowner is friends with my client and accompanied her to the mediation (these are elderly and/or disabled people and a co-pilot was needed for the drive). We thought all was worked out, but evidently the HOA has some hot heads in the community.

The client and her friend were followed by the HOA president and two board members. When they arrived home this man began a verbal altercation with the friend. Later that day the HOA president sees the friend and her husband headed for their evening bike ride to the common areas and not only locks them out of the common areas, but pulls a gun on them when they asked him if he was going to unlock the gate. Using his cell phone to tape the incident, he announced "I fear for my life" and pulls out the gun.

If this guy feared for his life by two disabled people, both smaller than him, then why did he go to their home earlier? Why did he follow them when he saw them on their bikes? Why didn't he leave after locking the gate?

Yes, the law has no duty to retreat, but I don't think it was intended for you to stalk people either.

HOA Wars

I had all intentions of blogging every day, but right now I have some interesting and time-consuming cases and a trial coming up shortly. I have had to actually turn down requests for consultations, which I absolutely do not want to do because owners do not have many association attorneys in Florida willing to represent homeowners. The money is in representing the associations. I will represent associations if they want to operate fairly and not get abusive or obnoxious. I guess it doesn't need to be said my list of association clients is short.

So why do I fight for owners and turn away good paying associations if they do not meet my standards? After all, I have been accused of being a little nuts for ignoring the "cash cow." The thing is if you have ever lived through HOA Hell, and I have, you would understand. I don't have to wonder what it was like to live during the Civil War -- it goes on in associations all over Florida every day. It's the association versus the owners -- those with power versus those who are powerless. It's also like being back in high school and you have to deal with the popular kids. The movie "Mean Girls" springs to mind.

To summarize my fight:

1. Fighting a HOA who refuses to acknowledge the Florida-friendly landscaping statute and my client's right to conserve water and not pollute the planet with fertilizers, pesticides and herbicides (while letting board members use HOA resources to maintain their St. Augustine grass).

2. Fighting a HOA with the "popular kids" in charge who changed the Declarations by simply retyping them and passing them off as the official documents.

3. Fighting a HOA controlled by a developer who has been arrested on 8 felony counts of stealing $539,000+ from the HOA and he's still in charge!

4. Starting a fight with a condo association with a board that steals money by doing business with companies owned by the board members, charging the expenses of these companies to the condo association, and reimbursing themselves lots of $$$ for "supplies." If Governor Rick Scott signs that HOA Reform bill come July 1st the property management company helping them will be in big trouble too.

And then there's the usual cases of illegal fines, illegal assessments, HOAs insisting they are mandatory when they are not and just all out bullying.

So, I'll be real busy for the next four or five weeks, but I'll get back to posting my usual "how to stay out of trouble with your association" blogs on a regular basis after that.

In the meanwhile, stay safe, pay attention to the rules so they can't be used against you, and never withhold assessments (even if the board is lining their own pockets with the money).

2013 HOA Legislation Highlights

Last week the House of Representatives and the Senate passed Bill 7119 providing many needed amendments to Florida Statute 720, the statute regulating homeowner associations. We are now waiting for the governor to sign the bill into law, which would go into effect July 1, 2013.

One of the most important amendments to the statute removes a director or officer from the Board of Directors of an association if the director or officer has been accused of committing a crime of theft or embezzlement involving the association. The bill also includes an amendment to Chapter 468, which regulates community association managers ("CAM"), and calls for discipline by the Department of Business & Professional Regulation ("DBPR") if the CAM commits violations of Florida Statutes 720, 718 and 719, if the CAM contracts on behalf of an association with any entity in which the CAM has a financial interest without disclosure, obtaining a license or certification by fraud, misrepresentation or concealment, being convicted of or pleading no contest to a felony, violation of any DBPR order or rule, committing gross misconduct or gross negligence, or any other violation of Fla. Stat. 468.436.

Directors and officers of a HOA board, if the bill is signed by the governor, will now be required to certify in writing they have read the Declarations, Bylaws, Articles of Incorporation and any other rules and policy of the HOA or complete a certificate attesting they have completed a state-approved educational course. The bill also requires directors and officers to disclose their financial interest in any entity submitting a bid for a contract with the HOA and if a member objects to the contract, the contract must be put to a vote by the membership for approval. Additional language requires the HOA to insure and bond anyone handling HOA funds prohibits kickbacks. Yes, good old common sense needed to be put into the HOA statutes, but I wonder if those people affected by this law will actually care to stop accepting kickbacks!

Associations would now be required to keep the official records within 45 miles of the community or within the county where the community is located. (I predict we will have some legal battles over the use of the word "or" here.) There should never be a choice in a statute. Associations, at their discretion, can provide the records electronically by posting them on the Internet or allowing members to read them on a computer screen and then requesting a printed copy. If the HOA has a copy machine it must provide the copies if the request is 25 pages or less. The association could still charge 25 cents per page (down from 50 cents) for copies made with the HOA copier or, if the request exceeds 25 pages, the actual cost of copies plus any reasonable hourly fee NOT TO EXCEED $20 PER HOUR) for a vendor or employee to make the copies. No personnel charges are allowed if the request is under 25 pages. The HOA is also required to provide the member with a copy of the vendor's invoice for outside copying services. The new bill requires the HOA to allow members to scan documents with any portable device they may have or otherwise make electronic copies.

The new bill would require a developer to designate reserve funds by components rather than one general fund if the developer provides for reserves.

The new bill would require associations to register with DBPR. This is the first step to future legislation to regulate HOAs. Currently no one knows for certain how many HOAs are operating in the State of Florida.

The new bill would also require associations to provide copies of an amendment to its members within 30 days of recording an amendment.

One provision I do not like is HOAs would no longer be required to allow members to be nominated from the floor at elections if there is a process for nominations prior to the election. The HOAs will not be required to hold an election if the number of candidates is equal to or less than the vacancies. While this would save the HOAs money because of the expense involved, it takes away some of the power of the members if they cannot nominate at the election and they don't realize until the election not enough people stepped forward to be elected. Expect a lot of improper conduct with this one. If ever the members of associations needed to be motivated to be involved with their HOA, this provision of the bill should do it.

The new bill has provisions for forcing the turnover of control of the association to the members if the developer abandons its responsibility to maintain or complete amenities, files for Chapter 7 bankruptcy, loses or gives up title to common areas through foreclosure or pre-foreclosure, or a receiver is appointed. The bill also provides the members the right to elect at least one board member when 50% of the properties are no longer owned by the developer and also limits the rights of the developer to amend the governing documents.

Finally, the bill would not wipe out any past due assessments on a property if the HOA takes title to the property to foreclose its own lien. Any buyer would be liable for the past due assessments; however, any assessments accruing while the HOA has title are the responsibility of the HOA.

If you support this bill, please send Governor Rick Scott an email asking him to sign the bill into law. His email address is rick.scott@eog.myflorida.com.

Avoiding Trouble with Your Association

A big source of disputes between owners and their associations concerns claims by the association the owner made changes or improvements to their property or unit without permission of the association. The owners often claim they sent an application to the association and after not receiving a response for more than thirty (30) days, proceeded with the changes or improvements, believing approval was automatic if the association failed to respond.

This is a big mistake! At one time there was a statute providing automatic approval if no response was received and many association documents also contain language for the same, but the dispute arises when the association claims it did not receive the application. The owner must be able to prove the application was submitted. This can be done by submitting all applications by certified mail, return receipt in order to track delivery of the request.

Make sure any approval is in writing. Quite often a board member or property manager will give verbal approval only to deny it later when other board members object.

Also, check your Declarations and Bylaws before assuming no response equates to automatic approval. If there is no language granting automatic approval, then you have to take steps to obtain the written approval. This is especially important now that the Florida Legislature has put back the statute allowing associations to lien and foreclose on fines. If your association imposes a fine against you for unapproved changes or improvements, you could lose your home. Even without the language, your association could sue you to obtain an injunction forcing you to return your property or unit to its original state. Even more important, once you are labeled a troublemaker by your association they will make your life miserable. Unfortunately they have a lot of power to do just that.

In summary, always submit an application by certified mail, return receipt and, if you do not hear from the association within thirty (30) days, contact them to find out when your application will be reviewed. Make sure to get the approval in writing and do not rely on verbal approvals.

Do Members Get to Speak At Meetings?

One of the most misunderstood statutes governing community associations (homeowner and condo) is the statute giving owners the right to speak at board meetings or members’ meetings.

Members, under Fla. Stat. 720.303 (homeowner associations) and Fla. Stat. 718.112(2)(c) (condo associations) have a right to speak at meetings on any agenda item. The association has the right; however, to adopt “reasonable” rules regarding frequency, duration and manner. There’s that term again – reasonable. I equate reasonable to requiring costly litigation to define the term.

Industry practice has been to allow owners to speak for up to three minutes at the end of a meeting, which was how the statutes read. This is counter-intuitive because the agenda items have been discussed and voted upon by the board. It negates any impact the speaker has in voicing their opinion. The statutes have been changed to be more flexible, but the associations have not.

Playing devil’s advocate, I can understand the need to conduct business this way. Every association has at least one member who could be a filibuster in the Florida Legislature. They will challenge every topic and monopolize the meeting. This means meetings last hours and other owners quit attending.

I urge the associations to adopt rules regarding the owners’ right to speak at meetings and adopt something reasonable. Here’s an idea – any topic that requires the board to vote should allow the owners to speak for three minutes, speak only once on that topic, and the speaker will be timed.

Associations and Attorneys' Fees

A common question asked of me in my practice of community association law is the right of the association to demand attorneys’ fees from members. The law is the same for homeowner associations (HOAs) and condo associations (COAs).

There are three types of situations in which an association will incur legal fees and attempt to pass them on to the owner of property:

1. Past due assessment collection
2. Covenant enforcement
3. Foreclosure litigation

By state law associations are allowed to reimbursement for attorneys’ fees incurred to collect past due assessments even if no litigation is filed in court. The law, in fact, provides any payments tendered will be applied to attorneys’ fees first, interest and late fees next, and assessments last. This means the owner is always past due in the payment of assessments unless the amount demanded is paid in full. Attorneys are paid for every minute of time they spend assisting a client, including telephone calls, emails and faxes. Every attempt to argue the validity of the amount incurs more fees. It’s a no-win situation for the owners, so the best option is to pay the bill in full and then demand a refund if you think the fees are excessive.

There is no state law allowing associations to demand reimbursement of attorneys’ fees for addressing covenant violations. The governing documents of the association may have a provision for this and in such an instance the association can pass the fees on to the owner. The governing documents of an association are a contract between you and the association. You can contract away your constitutional rights. An association cannot; however, engage in any conduct not authorized by its governing documents. Many associations, in response to the repeal of the statute authorizing lien and foreclosure for unpaid fines, amended the governing documents, often illegally, to state any attorneys’ fees for covenant violations would be an individual assessment against the property subject to lien and foreclosure. While I believe this could be defeated in court, I do not recommend clients risking the loss of their home over this and the cost of litigating the issue far exceeds any amount demanded. The associations tend to get their way with their illegal demands simply because the owners cannot afford to litigate. Sooner or later someone will litigate the issue and the associations will suffer the consequences of bad legal advice.

The final category is foreclosure litigation. The associations are named as defendants in a mortgage foreclosure by the banks. This is done to clear title to the property. The associations need to file an answer and affirmative defenses to preserve their right to collect the debt. Often the property is sold at auction by the courts. Any buyer of a property is liable for the past due assessments of the previous owner. The statute does not authorize the association to pass on legal fees, interest or late charges to the new owner. Industry practice is to pass on all the fees and charges. There is no Florida Statute or Rule of Civil Procedure allowing a defendant to pass on the costs of the litigation to another party without a court order. Yet the association attorneys continue this practice and get away with it. Rather than fight with the association on this, a complaint against the attorney is more appropriate.