Q: There are rumors going around about new laws concerning estoppels. Can you summarize the new requirements?
-B.A., Marco Island
A: Effective July 1, there are a number of new laws affecting community associations. Most of the new legislation is aimed specifically at condominiums, but there are some new laws relevant to homeowners associations and co-ops as well. You can find a summary of the new laws on our website at www.gadclaw.com.
Specifically concerning estoppels, the statutes will now require that the Association provide the estoppel within 10 business days as opposed to 15 calendar days and now specifically provides that the clock begins to tick upon receipt of a written or electronic request. If the estoppel is not timely provided, the association forfeits any fee it can charge to prepare the estoppel. Additionally, the statute requires certain information be included on the estoppel, such as information related to parking spaces, assessments, and other relevant information.
The statute also provides a maximum fee schedule for estoppels. If the owner is current on assessments, the fee may not exceed $250. If the owner is delinquent, the association can charge up to an additional $150. The association can also charge a rush fee of $100 for 3 business day delivery.
The association should take three important steps to adapt to this new law. First, the association should ensure that the fee schedule for estoppels is contained either in a written management contract or by resolution of the board. The association should also adopt a resolution identifying the specific individuals who are authorized to receive estoppels and prepare estoppels. This information should be posted on the website, if any, so that the response deadline is only triggered when an authorized individual receives the request. Finally, the association should ensure that any form or template estoppel contains all of the information required by the new law. You should contact your legal counsel to answer any questions interpreting the new laws.
Q: The new Board ran on a platform of rule enforcement and compliance. I am concerned that we do not know when many of the current violations began and I am concerned that we will not find volunteers to serve on the covenants committee to levy fines and suspensions. How does this work?
A: First, you raise a good point with respect to the duration of existing violations. Florida has a five year statute of limitations on the enforcement of contract breaches – which would include violations of the covenants. So if an owner has an unapproved satellite dish mounted on the roof and it has been there for more than five years, the owner may have a defense that the Board is precluded from requiring its removal despite the fact that it is a violation of a covenant. Depending on the strength of your official records, it is also possible that the prior Board approved a number of changes or acts which are also technically violations of the covenants. If you have a significant concern over prior violations, there is a court decision referred to as the “Chattel Shipping” case which essentially allows this Board to draw a line in the sand moving forward. The result is that all violations as of a specific date are essentially grandfathered and all new violations will be strictly enforced. The intent is to avoid a situation where an owner claims the Board is selectively enforcing certain rules, but in situations where the current Board is unaware which existing violations are enforceable and which are unenforceable. The Board should adopt the resolution drawing the line in the sand at a Board meeting after providing 14 days written notice to the members of the Board meeting.
Next, there are varying opinions in the legal community concerning minimum procedural requirements to levy a fine. The statute does not provide a great amount of detail and the overarching theme is that the owner sought to be fined should be provided due process. The statute provides that owners should be provided at least 14 days’ notice and opportunity for a hearing before a committee of impartial members of the community to approve or disapprove the fine proposed by the Board.
Some attorneys interpret the “opportunity for a hearing” to mean that you only need to offer a hearing, and if the hearing is not specifically requested, that the hearing can be avoided and the fine is automatically due and payable. If you agree with this camp, then you may be able to fine until a hearing is actually requested.
Personally, I do not agree with that interpretation. In my opinion, the association should have a hearing with a committee irrespective of whether the hearing is requested by the owner. This may be conservative, but it places the association in a much stronger position to defend the fine in a courtroom and you do not want to lose over a procedural step that could easily have been avoided. As a result, my recommendation is to search high and low for eligible volunteers who are fair and who believe in the Board’s mission to enforce the covenants.
The other part of the analysis is that you need to review your specific governing documents to determine whether the association has self-imposed additional or different procedural requirements. If there are additional requirements, such as warning letters, you would need to make sure you follow both the statute and your governing documents.
Q: I am moving out of my condominium association and want to rent out the unit. I was advised that I should hold title to the property in a LLC for asset protection purposes. Also, to protect my investment, I want to serve on the Board of Directors of the condominium association but I was told that I would not be eligible. Is this true?
A: Great question. First, there are a lot of benefits to holding title in a limited liability company, particular when you are renting the unit. Most importantly, the LLC may provide some asset protection for any accidents that happen in the unit while it is rented when you, as the owner, are not monitoring the property every day. There are a lot of factors to determine whether it is advisable, such as whether you have a mortgage on the unit, the cost different for insurance, your tax status and whether you are eligible to be taxed as a pass through entity, and whether you want to take on the additional annual filings and reporting requirements.
With respect to the comment on eligibility for the Board of Directors, the answer really depends on the language included in your Bylaws. Directors must be individuals, so your LLC would not be able to be a Director, which is why most Bylaws will include a statement that any manager or officer of the LLC would be eligible to serve on the Board of Directors for that particular unit. Some documents also require LLCs to designate a “primary occupant” of the unit and provide that the primary occupant is eligible to serve on the Board and definition of primary occupant can vary as well.
It would be my recommendation you have the Bylaws and other governing documents reviewed by a licensed Florida attorney to determine if you are eligible.