SUMMARY OF THE 2006 LEGISLATIVE SESSION

By: Donna D. Berger, Esq.

The 2006 Regular Session of the Legislature produced only a few changes that will directly impact common interest ownership communities and several others that indirectly impact residents and owners in these types of communities.  The two community association-based bills (HB 391 and SB 1556) that did pass out of both the House and Senate were both subsequently vetoed by the Governor.  We also saw a return of some condominium “reforms” that again called for over-regulation and micromanagement of private residential communities in the form of Representative Garcia’s HB 1227.  This bill and Senator Siplin’s anti-foreclosure bill (SB 586) were met with consternation from community leaders and owners alike and, as a result, were never even placed on a committee agenda.

Owners in all types of common interest ownership communities are more highly regulated by the State than other real property owners.  As such, community association members must remain vigilant about the types of laws that are passed in Tallahassee which can and often do impact the manner in which they operate and administer their communities, the costs associated with such operations, and ultimately the value of their homes.  It is possible for owners to become part of the process year-round by meeting with their legislators during the summer and early Fall when these individuals are back in their district offices and eager to meet with their constituents.  Community members should make appointments to introduce themselves, their community and their particular concerns be it high-rise safety regulations, MRTA reinstatement for homeowners’ associations, density issues, etc.  Once the session starts each March, community members should become informed about the bills that are pending that impact their communities and weighing in at each committee stop for those bills.  The information and tools provided on the Community Association Leadership Lobby (CALL) website at http://www.callbp.com allow owners and board members alike to log on, read the bills and bill summaries and use the Legislator Connect tool to contact their representatives as well as all members of the committee hearing a particular bill.  While there is no doubt it takes persistence and patience to participate in the political process, it is possible to ensure responsive and responsible community association legislation by getting involved.

Let’s take a look at the bills that passed, the bills that were defeated, two proposed constitutional amendments regarding homestead exemptions and the two community association bills that were vetoed by Governor Bush.

BILLS THAT PASSED

HB 817 (Telecom Bill): Currently, even if only one unit in a multifamily property wishes to receive communications services from a last resort provider (be it phone service, television service, etc.) that provider must provide service regardless of whether it is profitable for them to do so.  This bill modifies existing telecommunications service to multi-family properties so that:

     Telecommunications providers of last resort are not obligated to provide basic local telecommunications service to customers in multi-family properties under certain conditions which are specifically mentioned in the bill which would impair the telecommunications provider’s ability to financially “break even”.

·        In the event that the conditions mentioned in the bill no longer exist, the telecommunications provider of last resort’s obligation is reinstated. 

SB 24 (Hurricane Preparedness / Sales tax):

This bill creates a sales tax exemption for hurricane supplies.  Although this year’s exemption window has already passed, the bill creates an exemption window for next year from May 20, 2007 – May 31, 2007.  The bill grants exemptions for items such as flashlights, radios, tarps or waterproof sheeting, ground anchors or tie downs, fuel tanks, batteries, non-electric coolers, carbon monoxide detectors, blue ice, portable generators, and storm shutters as long as these items are within the specified price cap for each item.  For example, only storm shutters under $300 are exempt while only flashlights that are under $20 are exempt.

SB 1980 (Insurance Bill): SB 1980 was a comprehensive insurance bill consisting of nearly 100 pages.  As such, the informational bullet points outlined herein are abbreviated by necessity to include those items of interest to consumers as opposed to insurers.

Funding the 2005 Deficit of Citizens Property Insurance Corporation

• The bill appropriates $715 million from General Revenue to Citizens Property Insurance Corporation (“Citizens”) to offset the 2005 deficit, estimated to be about $1.73 billion.  This appropriation is expected to reduce an estimated $920 million regular assessment against property insurers to about $205 million, and thereby reduce an estimated average 11 percent premium surcharge to about 2.5 percent for property insurance policyholders in the state (including Citizens policyholders). The bill also requires that the remaining estimated $800 million of the deficit must be amortized and collected from policyholders over a 10-year period.

Hurricane Loss Mitigation

• The bill establishes the Florida Comprehensive Hurricane Damage Mitigation Program within the Department of Financial Services (“DFS”).

• Provides for free inspections of single-family homes that are primary residences and multifamily structures containing no more than four units to determine what mitigation measures are needed to reduce hurricane damage

• Provides for 50 percent matching State grants from DFS to encourage those eligible owners to retrofit certain enumerated improvements in order to reduce vulnerability to hurricane damage.  There is also a cap on the grant amount.  Those that are deemed eligible by a free home inspection are not assured eligibility for the receipt of grant funds.

Insurance Rates: Requirements and Exceptions for Approval by the Office of Insurance Regulation (“OIR”)

Effective July 1, 2007, an insurer may increase or decrease rates by up to 5 percent on a statewide average, or 10 percent for any territory, for residential property insurance in those areas that a reasonable degree of competition exists, without being subject to a determination by OIR that the rate is excessive or unfairly discriminatory.  This provision may be used by an insurer once in a 12-month period.

• Authorizes the Insurance Consumer Advocate appointed by the CFO to represent the public in insurance rate proceedings before an arbitration panel.

Eligibility for Coverage in Citizens (Non-homestead Property and $1 Million Homes)

• Effective March 1, 2007, non-homestead property is not eligible for coverage in Citizens and is not eligible for renewal unless the property owner provides a sworn affidavit from one or more insurance agents that they have made their best efforts to obtain coverage and that the property has been rejected by at least one authorized insurer and three surplus lines insurers (for all agents combined).  Homestead property is defined in the bill.

• Effective July 1, 2008, a personal lines residential structure that has a dwelling replacement cost of $1 million or more, or a single condominium unit that has a combined dwelling and contents replacement cost of $1 million or more, is not eligible for coverage by Citizens. Such dwellings insured by Citizens on June 30, 2008, may continue to be covered until the end of the policy term and may reapply for coverage for up to an additional three years if the property owner provides a sworn affidavit from one or more insurance agents that they have made their best efforts to obtain coverage and that the property has been rejected by at least one authorized insurer and three surplus lines insurers (for all agents combined).

Rates Charged by Citizens

• Provides that Citizens’ rate filings for personal lines, wind-only policies (i.e., in the high risk account) must be approved or disapproved by OIR within 90 days after receipt of the filing, or shall be considered deemed approved.

• Requires use of the public hurricane loss model as the minimum benchmark for determining windstorm rates for Citizens, after the public model has been found to be accurate and reliable by the Florida Commission on Hurricane Loss Projection Methodology.

• Makes the current requirement that Citizens’ rates not be competitive with authorized insurers, inapplicable in a county or area for which OIR determines that no authorized insurer is offering coverage.

Other Changes to Citizens

• Requires a 10-day waiting period for new applications, but allows for Citizens to bind coverage during this period under certain circumstances. If an authorized insurer offers coverage during this 10-day period, the applicant is not eligible for coverage in Citizens regardless of whether the insurer appoints the agent who submitted the application. (That is, the “Consumer Choice” law, does not apply during the first 10 days after a new application for coverage has been submitted to Citizens.)

• Requires Citizens to offer policyholders quarterly and semiannual premium payment plans.

• Allows Citizens to adopt policies that provide more restrictive coverage than provided in the voluntary market.

• Requires that coverage on mobile homes built prior to 1994 be limited to actual cash value, rather than replacement cost.

Miscellaneous Provisions

• Requires that an insurer make a claims payment directly to the primary policyholder without requiring an endorsement from a lien holder or mortgage holder, for: a) personal property and contents; b) additional living expenses; and c) other covered items not subject to a security interest recorded in the dual interest provision of the insurance policy.

• Allows insurers to make electronic payment of insurance claims, under certain conditions, without written authorization.

• Clarifies that if a property insurer does not obtain a written rejection from the policyholder for coverage for the additional construction costs of meeting new building codes, commonly called “law and ordinance coverage,” the policy is deemed to include such coverage limited to 25 percent of the dwelling limit, not the 50 percent limit that must also be offered. Current law is ambiguous on this point, but the bill conforms to the current interpretation used by OIR.

• Clarifies that the law requiring insurers to offer replacement cost coverage and, if elected, to pay the replacement cost whether or not the policyholder replaces or repairs the damaged property, does not prohibit an insurer from limiting its liability to the lesser of: the cost of repair, the cost to replace, or the limit of liability shown on the policy declarations page.

• Prohibits public adjusters from engaging in conflicts of interest by participating in the repair of damaged property that he adjusted.

• Provides procedures for the cancellation of a property and casualty insurance policy if the policyholder submits a check which is subsequently dishonored by a financial institution.

• The bill provides that an insurance policy can be cancelled from the

beginning, or back to the first day of coverage if the insured does not timely cure a dishonored check within 5 days of notice.

SB 264 (Homestead Exemption):

• The bill provides that a transfer of homestead property to additional grantees does not result in the loss of the homestead exemption for the property if the grantor is also one of the grantees. 

HB 1089 (Construction Contracting):

• Provides that the statutory condominium warranties given as a matter of law to condominium associations by developers and contractors do not apply where construction begins before the project is designated by the developer as a condominium.  This is a significant change in the law providing that statutory condominium warranties will not be given to associations if a project begins as an apartment building and is subsequently converted to condominium while construction is ongoing. 

• Lawsuits for construction defects must be filed within four years of completion of construction, except claims for latent defects, which must be filed within four years of discovery and under no circumstances more than ten years after completion of construction.

HB 1139 (Construction Defects):

• Currently, the law only requires alternative dispute resolution for construction defects arising from the construction of homes.  This bill expands the alternative dispute resolution process to include construction defects arising from any real property.

• This bill also requires a claimant serve a statutory notice of claim (found in Section 558.005 of the Florida Statutes) on the contractor, subcontractor, supplier, or designer within a specified time period (at least 60 days before filing a complaint, or 120 days before filing a complaint in an action involving an association representing more than 20 parcels). The bill also requires the contractor, subcontractor, supplier, or designer be given a reasonable opportunity to cure the alleged defects.

SB 7121 (Hurricane Bill):

This bill includes many measures that attempt to remedy the problems with emergency systems exposed by the recent hurricanes.  Especially relevant to high-rise and cooperative owners are the following provisions:

• Requires high-rises over 75 feet high which have an elevator to have at least one (1) of those elevators capable of running on a generator.  The elevator must be able to operate each day over a 5-day period.

• Requires that building inspectors verify engineering plans for generators by December 31, 2006.  Installation of the generator and all related equipment and storage facilities must be completed by December 31, 2007.
  

• The association must maintain an Emergency Operations Plan (EOP) detailing operations before, during, and after an emergency.  At a minimum, the plan must include: a life-safety plan for evacuation, maintenance of the lighting and electrical supply, and a provision for the health, safety, and welfare of the residents.  A log of quarterly inspections must also be kept showing the emergency equipment is in good and working condition.

• The bill is not clear as to the effective date of the EOP requirement although given that no later date than July 1, 2006 is specified, the conservative approach is to have these emergency plans prepared and implemented AS SOON AS POSSIBLE.  Given that each building is unique in the age of its membership, the number of building occupants, whether the building has storm shutters, and the complexity of existing life-safety systems, we strongly recommend that affected high-rises contact their association attorneys for the development of this very important plan.

CONSTITUTIONAL AMENDMENTS

HJR 353 (Proposed Constitutional Amendment):

This joint resolution would amend Article VII, Section 6 of the State Constitution, to increase the maximum additional homestead exemption that a county or municipality may grant to low income seniors from $25,000 to $50,000. If the amendment is approved by voters at the next general or special election, the amendment for low-income seniors takes effect on January 1, 2007.

HJR 631 (WWII Veterans Constitutional Amendment):

The measure is a proposed constitutional amendment that would extend to disabled veterans of World War II a discount on the property taxes on their homestead property equal to the percentage of their disability.  If the amendment is approved by voters at the next general or special election, the amendment for low-income seniors takes effect on December 7, 2006.

BILLS THAT WERE DEFEATED

SB 586 (Siplin’s Anti-foreclosure):

• Would have removed reasonable attorney’s fees from the amounts secured by an Association’s lien for delinquent maintenance.

• Would have prohibited an association from bringing a lien foreclosure action or an action to recover a money judgment for any unpaid condominium assessments in amounts less than $2,500. The association would NOT be entitled to recover reasonable attorney’s fees and costs incurred while trying to collect delinquent assessments.

• Would have prohibited a judge from entering a foreclosure judgment until at least 180 days after the association gives written notice to the unit owner of its intention to foreclose its lien to collect the unpaid assessments. Removes the ability of a court to award attorney’s fees and costs as permitted by law to the Association for its collection efforts.

This is the second year in a row that this legislation was introduced and soundly defeated.

HB 1227 (Garcia’s Condo Bill):

• Would have required all notices of proposed amendments to a declaration of condominium be sent to unit owners by certified mail, return receipt requested.

• Financial reporting requirements (i.e. to have your financial statements compiled, reviewed or audited) would not have been waived for more than 2 consecutive years.

• If proceeds of the Association’s hazard insurance policy (covering items such as windows and doors) were insufficient to pay the estimated costs of reconstruction, assessments would have been made against ALL unit owners to pay for same.

• Guest Disabled Parking-Residents with disabilities would not have been able to park in a disabled guest space unless their assigned parking space was in use illegally.

• When a unit owner filed a written inquiry by certified mail with the Board, the Board would have been required to respond in writing by certified mail, return receipt requested. This amendment also removed the ability of a Board to adopt reasonable rules and regulations regarding the frequency and manner of responding to unit owner inquiries within a 30-day time period.

• A unit owner would not have been able to serve as a director for more than 2 terms or longer than 4 years. A member would not have been able to serve as an officer for more than 1 term. Co-owners of a unit would not have been able to serve on the board during the same fiscal year.

• Would have removed the ability of an association to print the candidate information sheet on both sides of the paper to reduce costs.

• Would have allowed unit owners to petition Board via written request to place an item on the annual meeting agenda at least 90 days prior to the annual meeting.

• Would have provided that in the case of a catastrophic event, the Association may use reserve funds for nonscheduled purposes to mitigate further damage to the units or common elements or to make the condominium accessible for repairs.

• Associations would no longer be able to accelerate assessments for a delinquent owner until a lien has been filed.

• Board would have been required to yearly restate its hurricane shutter specifications at the annual meeting.

• Would have allowed boards to only enter into bulk cable contracts for BASIC SERVICE and nothing else. Majority of the unit owners can only cancel bulk cable contracts for basic service.

• Would have prohibited a lien from being filed on a condominium parcel until 30 days after the date a notice of intent to file a lien had been SERVED on the owner by certified mail or by personal service of process.

• Would have prohibited the association from entering into service contracts for terms in excess of three years and prohibits them from entering into contracts with automatic renewals.

• A contract for reconstruction or repair of the property that exceeds 10% of the total annual budget including reserves would have required the approval of an attorney hired by the Association.

• Would have required the board to notify anyone who is subject to an enforcement action by certified mail and the violator shall have 30 DAYS in which to respond in writing (except in the case of imminent danger to person or property). If no response is provided and the violation continues or is repeated, the Association may then proceed with enforcement.

• Would have given the Ombudsman the authority to operate independently of the DBPR and without the approval or control of the Department. The Department would have been required to render administrative support to the Ombudsman in terms of budget, personnel, office space, etc.

• Would have expanded the Ombudsman’s powers to include the ability to “command” meetings between the board and unit owners and to make recommendations to the Division to pursue enforcement action in circuit court on behalf of a class of unit owners, LESSEES or PURCHASERS for declaratory relief, injunctive relief, or restitution against any developer, association officer or member of the Board or its assignees or agents when there is reasonable cause to believe misconduct has occurred. No one would have been able to question the Ombudsman’s appointment of an election monitor or interfere with same

BILLS THAT WERE VETOED

HB 391 (HOAs): At CALL’s insistence, the bill underwent substantial positive changes from its inception and was passed unanimously by both the House and Senate. It was, however, vetoed by Governor Bush.  Some of the important provisions of this bill included:

• Allowed high-rises until 2025 to complete common area sprinkler system retrofitting.

• Authorized a homeowner’s association to use the procedures set forth in Chapters 720.403-720.407 to revive lapsed covenants.

• Prohibited local governments from establishing limitations on a unit owner’s or association’s ability to permit guests to use or access their units or common elements to access a public beach or private beach adjacent to the condominium.

• Allowed associations to pass changes to declarations or bylaws without lender consent where the proposed amendment does not affect either the lien security or priority.

• Required committee meetings to be open to all members when a final decision will be made regarding the expenditure of association funds, or when architectural decisions with respect to a specific parcel of residential property are approved or disapproved.

• Required committee meetings or other similar bodies to be open to all members when a final decision will be made regarding the expenditure of association funds, or when architectural decisions with respect to a specific parcel of residential property are approved or disapproved.  Also allows an association to charge a fee in preparing documents as well as recovering attorney’s fees.

• Created a passive reserve for HOAs.  Upon a vote of the membership, a reserve may be created.

• Allowed more time to complete financial reporting and mailings

• Discouraged frivolous lawsuits against the association when the association acts reasonably.

• Required a developer to have the association’s financial records audited by an independent certified public accountant from the date of incorporation through each fiscal year thereafter.

• Mediation fix: Made the qualifications of mediators consistent with other fields.

• Included a statutory, easy-to-use form notice for mediation.

 

SB 1556 (Termination of Condominiums):

• The bill required a plan of termination to be prepared and presented to the unit owners in the condominium for approval before termination can occur. The plan must have provide for the valuation of the individual units, the common elements, and the other assets of the condominium based upon their respective fair market values. The plan also further set out the share that each unit owner will receive if the plan of termination is adopted, and if the property is to be sold, it must have stated the minimum sale terms.

• The bill provided for quarterly reports prepared by the association, receiver, or termination trustee following the approval of the termination plan.

• Provided certain notice requirements to be followed before a vote for termination may occur.

• The value of each unit would have been determined based upon the fair market value of the units immediately before the termination by one or more independent appraisers or based upon he values maintained by the county property appraiser.

• The consent of mortgagees would not have been required for the adoption of a plan of termination under the provisions of the bill unless the proceeds under the plan are less than the full satisfaction of the mortgage lien encumbering the unit.

• The bill provided three methods for the termination of condominium ownership:

• Economic Waste or Impossibility:

• By Court Approval

• Optional Method requiring a supermajority of voting interests

The Governor has charged the Department of Business and Professional Regulation with holding townhall meetings around the State over the next few months to gather public input on the topic of condominium termination.

The last few legislative sessions have seen a rash of community association bills, some good and a lot ill-advised.  There is every indication that this trend will continue especially since Governor Bush has indicated that he’d like to see a “move toward establishing a comprehensive common interest realty law” which may indicate bringing homeowner’s associations, condominiums, cooperatives, timeshares, and mobile home communities all together under one statutory roof.  Whether or not that is an idea that is appealing to members in these very different types of communities is debatable.  However, it is more important than ever for common interest ownership members to make their voices heard on these issues early in the process before they become law.  If you have any questions about the Community Association Leadership Lobby (CALL), please contact me at 1-800-432-7712 or via email at dberger@becker-poliakoff.com