Naples Daily News Q&A Column, February 11, 2018

By February 11, 2018News, Questions & Answers

Q: We had to levy a special assessment as a result of Hurricane Irma.  Many owners in our condominium did not have insurance to cover the loss assessment and many have not paid the assessment.  What can we do?

-TP, Bonita Springs

A: The Association insures a sizable portion of the condominium, but owners are responsible to insure certain portions of the unit and Florida law requires that the owner’s insurance include “loss assessment coverage”.  This coverage is intended to reimburse an owner for special assessments levied by the Board to pay for damage to the condominium property from a casualty event. The problem is that many condominium owners do not carry the insurance, and many insurance policies have exceptions to coverage or make it difficult to trigger coverage.

Unfortunately, the availability of insurance does not alleviate the obligation to pay the special assessment.  The insurance exists to reimburse the owner, not direct payment to the association.

When the special assessment becomes delinquent, the Association should to follow the collections procedures set forth in its Declaration of Condominium and Florida Statutes section 718.116, which provides for lien rights, rent garnishments, and other collection tools which should be uniformly pursued throughout the condominium.

Q: My association is attempting to update its governing documents.   Previous amendments required 2/3 of all owners, which seems high. We are having a difficult time obtaining approval because a number of units are delinquent and disinterested.  Does Florida law provide any assistance?

-LB, Bonita Springs

A: Yes, it does.  Florida Statutes section 718.303(5) provides that a condominium may suspend the voting rights of a unit due to nonpayment of any monetary obligation which is more than 90 days delinquent.  It is important to note that in a condominium, the law recently changed and the amount owed to the condominium must be more than $1,000 in order to suspend voting rights. In a condominium, if the amount is less than $1,000, the voting rights may not be suspended.  In a homeowners’ association under Chapter 720, however, there is no minimum dollar threshold before you can suspend voting rights and the previous law still applies.

Additionally, the statute was also recently clarified that these suspended voting interests “shall be subtracted from the total number of voting interests in the association, which shall be reduced by the number of suspended voting interests when calculating the total percentage or number of all voting interests available to take or approve any action.”  Let’s assume you have 100 units. In the situation, you would need 51 owners to vote in favor of the proposed amendments. If you have 10 units that are more than 90 days delinquent, the Board can suspend the voting rights of these 10 units. This means you would only need a majority of 90, or 46 owners, to vote in favor of the proposed amendments.

Another caveat is that some governing documents expressly prohibit the suspension of voting rights for any reason, so be sure to have the documents reviewed by counsel to determine if this is available option.

Q: I am on the board of directors for a condominium association. We received a certified letter from an owner demanding an answer to a very long and complicated question that we have discussed time and time again at board meetings.  Do we have to respond?

-RY, Marco Island

A: Yes, you should.  Florida Statutes section 718.112 provides a mechanism for condominium owners to submit a “written inquiry” to the Association for a substantive response.  The statute does not provide whether the Association must perform research or seek professional opinions to provide a thorough response, but it does require a “substantive response” within 30 days of receipt of the inquiry.  The allows an additional 30 days, or a total of 60 days, if a legal opinion is requested to provide a response.

To incentivize a response, the Condominium Act provides that “the failure to provide a substantive response to the inquiry as provided herein precludes the board from recovering attorneys’ fees and costs in any subsequent litigation, administrative proceeding, or arbitration arising out of the inquiry.”  Thus, if the condominium ignores the written inquiry, there could be significant financial implications, even if successful, in any future dispute.

It is important to note that Chapter 720 governing homeowners associations does not include a parallel statute, and thus the above analysis is only applicable to condominiums in Florida.

Q: Our homeowners’ association has used the same mulch vendor for the last ten years and I am not aware that the Board has ever sought other bids.  The Board is claiming that the contract just automatically renews every year at a favorable right. Does the Board need to obtain bids?

-MN, Naples

A: There are two issues here.  First, do mulching contracts generally require bids?  Second, what is the effect of an auto renewal provision in a contract?

First, Florida Statutes section 720.3055 requires the homeowners association to obtain competitive bids for any contract for the provision of services requiring payment that exceeds 10 percent of the total annual budget of the homeowners association, including reserves.  There are a number of exceptions to this requirement, but mulching agreements would not be an exception and most likely do not exceed 10 percent of the budget. Thus, if the cost is in fact less than 10 percent of the budget, there is no need to obtain competitive bids.

Second, assuming the cost does exceed 10 percent of the budget and therefore requires competitive bids, the same statute referenced above provides that “if a contract was awarded under the competitive bid procedures of this section, any renewal of that contract is not subject to such competitive bid requirements if the contract contains a provision that allows the board to cancel the contract on 30 days’ notice.”  Thus, if the contract does require competitive bids based on the cost, and assuming the contract provides a termination provision where the Board can terminate the agreement with 30 days’ notice, the Board may be acting properly by allowing the contract to automatically renew.