HB 839

1
A bill to be entitled
2An act relating to homeowners' associations; amending s.
3720.303, F.S.; revising the powers and duties of
4homeowners' associations; requiring certain associations
5to be incorporated in this state; removing a provision
6authorizing associations to operate more than one
7community; prohibiting officers and directors from taking
8any action that is inconsistent with the declaration of
9covenants; authorizing associations to settle actions on
10appeal; revising procedures relating to legal actions
11commenced by the association; lowering the dollar amount
12for which the association must obtain approval by the
13members of the association before proceeding with the
14legal action; authorizing the association to enter into
15certain contracts; removing provisions authorizing an
16association to have more than one class of members and to
17issue membership certificates; prohibiting certain
18association defenses; prohibiting associations from
19restricting a member's freedom of association and from
20limiting the number of guests a member may have within a
2124-hour period; providing that officers and directors of
22an association may be personally liable for damages under
23certain circumstances; providing compensation for certain
24members under certain circumstances; providing criteria
25for establishing setback limits; prohibiting the
26association from denying or refusing to approve a member's
27plans for building on the member's property under certain
28circumstances; requiring the budget to provide for annual
29operating expenses; requiring the budget to include
30reserve accounts for capital expenditures and deferred
31maintenance; providing the amount to be reserved;
32authorizing the association to adjust replacement reserve
33assessments annually; authorizing the developer to vote to
34waive the reserves or reduce the funding of reserves for a
35certain period; revising provisions relating to financial
36reporting; revising time periods in which the association
37must complete its reporting; amending s. 720.307, F.S.;
38requiring developers to deliver financial records to the
39board; requiring certain information to be included in the
40records and for the records to be prepared in a specified
41manner; amending s. 720.308, F.S.; providing that a
42guarantee of common expenses shall be effective under
43certain circumstances; requiring the guarantee to meet
44certain requirements; authorizing the guarantee to provide
45certain requirements; requiring the stated dollar amount
46of the guarantee to be an exact dollar amount for each
47parcel identified in the declaration; providing payments
48required from the guarantor to be determined in a certain
49manner; providing a formula to determine the guarantor's
50total financial obligation to the association; providing
51that certain expenses incurred in the production of
52certain revenues shall not be included in the common
53expenses; providing an effective date.
54
55Be It Enacted by the Legislature of the State of Florida:
56
57     Section 1.  Subsections (1), (6), and (7) of section
58720.303, Florida Statutes, are amended to read:
59     720.303  Association powers and duties; meetings of board;
60official records; budgets; financial reporting; association
61funds; recalls.--
62     (1)  POWERS AND DUTIES.--
63     (a)  An association which operates a community as defined
64in s. 720.301, must be incorporated in this state, operated by
65an association that is a Florida corporation. After October 1,
661995, the association must be incorporated and the initial
67governing documents must be recorded in the official records of
68the county in which the community is located. An association may
69operate more than one community.
70     (b)  The officers and directors of an association have a
71fiduciary relationship to the members of who are served by the
72association.
73     (c)  The powers and duties of an association include those
74set forth in this chapter and, except as expressly limited or
75restricted in this chapter, those specifically set forth in the
76governing documents. The officers and directors of the
77association may not take any action that is inconsistent with
78the declaration of covenants.
79     (d)  After control of the association is obtained by
80members from the developers other than the developer, the
81association may institute, maintain, or settle on, or appeal
82actions or hearings in its name on behalf of the all members
83concerning matters of common interest to the members, including,
84but not limited to, the common areas; roof or structural
85components of a building, or other improvements for which the
86association is responsible; mechanical, electrical, or plumbing
87elements serving an improvement or building for which the
88association is responsible; representations of the developer
89pertaining to any existing or proposed commonly used facility;
90and protesting ad valorem taxes on commonly used facilities. The
91association may defend actions in eminent domain or bring
92inverse condemnation actions. Before commencing any legal action
93litigation against any party in the name of the association
94involving amounts in controversy in excess of $50,000 $100,000,
95the association must obtain the affirmative approval of a
96majority of the members of the association voting interests at a
97meeting of the association membership at which a quorum is
98present has been attained.
99     (e)  The association may enter into contracts for the
100benefit of the members of the association, including, but not
101limited to, contracts for maintaining, repairing, or improving
102the common areas of the association. This subsection does not
103limit any statutory or common-law right of any individual member
104or class of members to bring any action without participation by
105the association.
106     (f)  A member does not have the authority to act for the
107association by virtue of being a member of the association. An
108association may have more than one class of members and may
109issue membership certificates.
110     (g)  In any action between a member and the association, it
111shall not be a defense by the association that the association's
112actions, although inconsistent with the declaration of
113covenants, have been uniformly applied.
114     (h)  An association may not restrict a member's freedom of
115association and may not limit the number of guests a member may
116have within a 24-hour period.
117     (i)  An association of 15 or fewer parcels parcel owners
118may enforce only the requirements of those deed restrictions
119established prior to the purchase of each parcel upon an
120affected parcel owner or owners.
121     (j)  The officers and directors of an association may be
122personally liable for damages to a member if the actions of the
123officers and directors demonstrate a pattern of behavior
124designed to harass a member of the association.
125     (k)  Any action of the association by and through the
126officers and directors that limits the legal use of any portion
127of a member's property which is inconsistent with the
128declaration of covenants shall entitle the member to
129compensation for the fair market value of that portion of the
130member's property the use of which is being restricted.
131     (l)  In any association with more than 50 but fewer than 75
132parcels, for purposes of establishing setback limits, any parcel
133of 1 acre or less shall be deemed to have one front for purposes
134of determining the required front setback, if any. Only those
135setbacks specifically set forth in the declaration of covenants
136may be enforced by the association. Where the covenants are
137silent, the applicable county or municipal setbacks shall apply.
138     (m)  The association may not deny or refuse to approve a
139member's plans for building on the member's property unless the
140plan under consideration violates a specific provision of the
141declaration of covenants.
142     (6)  BUDGETS.--
143     (a)  The association shall prepare an annual budget
144providing for the annual operating expenses. The budget must
145reflect the estimated revenues and expenses for that year and
146the estimated surplus or deficit as of the end of the current
147year. The budget must set out separately all fees or charges for
148recreational amenities, whether owned by the association, the
149developer, or another person. The association shall provide each
150member with a copy of the annual budget or a written notice that
151a copy of the budget is available upon request at no charge to
152the member. The copy must be provided to the member within the
153time limits set forth in subsection (5).
154     (b)  In addition to annual operating expenses, the budget
155shall include reserve accounts for capital expenditures and
156deferred maintenance. These accounts shall include, but are not
157limited to, roof replacement, building painting, and pavement
158resurfacing, regardless of the amount of deferred maintenance
159expense or replacement cost, and any other item for which the
160deferred maintenance expense or replacement cost exceeds
161$10,000. The amount to be reserved shall be computed by means of
162a formula that is based upon estimated remaining useful life and
163estimated replacement cost or deferred maintenance expense of
164each reserve item. The association may adjust replacement
165reserve assessments annually to take into account any changes in
166estimates or extension of the useful life of a reserve item
167caused by deferred maintenance. This paragraph does not apply to
168an adopted budget for which the members of an association have
169determined, by a majority vote at a duly called meeting of the
170association, to provide no reserves or fewer reserves than
171required by this paragraph. However, prior to turnover of
172control of an association by a developer to unit owners, the
173developer may vote to waive the reserves or reduce the funding
174of reserves for the first 2 fiscal years of the association's
175operation, beginning with the fiscal year in which the initial
176declaration is recorded, after which time reserves may be waived
177or reduced only upon the vote of a majority of all nondeveloper
178voting interests voting in person or by limited proxy at a duly
179called meeting of the association. If a meeting of the unit
180owners has been called to determine whether to waive or reduce
181the funding of reserves and no such result is achieved or a
182quorum is not attained, the reserves as included in the budget
183shall go into effect. After the turnover, the developer may vote
184its voting interest to waive or reduce the funding of reserves.
185     (7)  FINANCIAL REPORTING.--Within 90 days after the end of
186the fiscal year, or annually on the date provided in the bylaws,
187the association shall prepare and complete, or contract for the
188preparation and completion of, a an annual financial report for
189the preceding fiscal year. Within 21 60 days after the final
190financial report is completed by the association or received
191from the third party, but not later than 120 days after the end
192of the fiscal year or other date as provided in the bylaws,
193close of the fiscal year. the association shall, within the time
194limits set forth in subsection (5), provide each member with a
195copy of the annual financial report or a written notice that a
196copy of the financial report is available upon request at no
197charge to the member. Financial reports shall be prepared as
198follows:
199     (a)  An association that meets the criteria of this
200paragraph shall prepare or cause to be prepared a complete set
201of financial statements in accordance with generally accepted
202accounting principles as adopted by the Board of Accountancy.
203The financial statements shall be based upon the association's
204total annual revenues, as follows:
205     1.  An association with total annual revenues of $100,000
206or more, but less than $200,000, shall prepare compiled
207financial statements.
208     2.  An association with total annual revenues of at least
209$200,000, but less than $400,000, shall prepare reviewed
210financial statements.
211     3.  An association with total annual revenues of $400,000
212or more shall prepare audited financial statements.
213     (b)1.  An association with total annual revenues of less
214than $100,000 shall prepare a report of cash receipts and
215expenditures.
216     2.  An association in a community of fewer than 50 parcels,
217regardless of the association's annual revenues, may prepare a
218report of cash receipts and expenditures in lieu of financial
219statements required by paragraph (a) unless the governing
220documents provide otherwise.
221     3.  A report of cash receipts and disbursement must
222disclose the amount of receipts by accounts and receipt
223classifications and the amount of expenses by accounts and
224expense classifications, including, but not limited to, the
225following, as applicable: costs for security, professional, and
226management fees and expenses; taxes; costs for recreation
227facilities; expenses for refuse collection and utility services;
228expenses for lawn care; costs for building maintenance and
229repair; insurance costs; administration and salary expenses; and
230reserves if maintained by the association.
231     (c)  If 20 percent of the parcel owners petition the board
232for a level of financial reporting higher than that required by
233this section, the association shall duly notice and hold a
234meeting of members within 30 days of receipt of the petition for
235the purpose of voting on raising the level of reporting for that
236fiscal year. Upon approval of a majority of the total voting
237interests of the parcel owners, the association shall prepare or
238cause to be prepared, shall amend the budget or adopt a special
239assessment to pay for the financial report regardless of any
240provision to the contrary in the governing documents, and shall
241provide within 90 days of the meeting or the end of the fiscal
242year, whichever occurs later:
243     1.  Compiled, reviewed, or audited financial statements, if
244the association is otherwise required to prepare a report of
245cash receipts and expenditures;
246     2.  Reviewed or audited financial statements, if the
247association is otherwise required to prepare compiled financial
248statements; or
249     3.  Audited financial statements if the association is
250otherwise required to prepare reviewed financial statements.
251     (d)  If approved by a majority of the voting interests
252present at a properly called meeting of the association, an
253association may prepare or cause to be prepared:
254     1.  A report of cash receipts and expenditures in lieu of a
255compiled, reviewed, or audited financial statement;
256     2.  A report of cash receipts and expenditures or a
257compiled financial statement in lieu of a reviewed or audited
258financial statement; or
259     3.  A report of cash receipts and expenditures, a compiled
260financial statement, or a reviewed financial statement in lieu
261of an audited financial statement.
262     Section 2.  Paragraph (t) is added to subsection (3) of
263section 720.307, Florida Statutes, to read:
264     720.307  Transition of association control in a
265community.--With respect to homeowners' associations:
266     (3)  At the time the members are entitled to elect at least
267a majority of the board of directors of the homeowners'
268association, the developer shall, at the developer's expense,
269within no more than 90 days deliver the following documents to
270the board:
271     (t)  The financial records, including financial statements
272of the association, and source documents from the incorporation
273of the association through the date of turnover. The records
274shall be audited by an independent certified public accountant
275for the period from the incorporation of the association or from
276the period covered by the last audit, if an audit has been
277performed for each fiscal year since incorporation. All
278financial statements shall be prepared in accordance with
279generally accepted accounting principles and shall be audited in
280accordance with generally accepted auditing standards, as
281prescribed by the Board of Accountancy, pursuant to chapter 473.
282The certified public accountant performing the audit shall
283examine to the extent necessary supporting documents and
284records, including the cash disbursements and related paid
285invoices to determine whether expenditures were for association
286purposes and the billings, cash receipts, and related records to
287determine whether the developer was charged and paid the proper
288amounts of assessments.
289     Section 3.  Section 720.308, Florida Statutes, is amended
290to read:
291     720.308  Assessments and charges.--
292     (1)  For any community created after October 1, 1995, the
293governing documents must describe the manner in which expenses
294are shared and specify the member's proportional share thereof.
295Assessments levied pursuant to the annual budget or special
296assessment must be in the member's proportional share of
297expenses as described in the governing document, which share may
298be different among classes of parcels based upon the state of
299development thereof, levels of services received by the
300applicable members, or other relevant factors. While the
301developer is in control of the homeowners' association, it may
302be excused from payment of its share of the operating expenses
303and assessments related to its parcels for any period of time
304for which the developer has, in the declaration, obligated
305itself to pay any operating expenses incurred that exceed the
306assessments receivable from other members and other income of
307the association. This subsection section does not apply to an
308association, no matter when created, if the association is
309created in a community that is included in an effective
310development-of-regional-impact development order as of the
311effective date of this act, together with any approved
312modifications thereto.
313     (2)  If a guarantee of common expenses is not included in
314the purchase contracts, declaration, or prospectus, any
315agreement establishing a guarantee shall be effective only upon
316the approval of a majority of the voting interests of the
317members other than the developer. Approval shall be expressed at
318a meeting of the members, voting in person or by limited proxy,
319or by agreement in writing without a meeting if provided in the
320bylaws. Such guarantee shall meet the requirements of this
321section.
322     (a)  The period of time for the guarantee shall be
323indicated by a specific beginning and ending date or event. The
324ending date or event shall be the same for all of the members of
325a homeowners' association, including members in different phases
326of the homeowners' association.
327     (b)  The guarantee may provide:
328     1.  Different intervals of time during a guarantee period
329with different dollar amounts for each such interval.
330     2.  That after the initial stated period the developer has
331an option to extend the guarantee for one or more additional
332stated periods. The extension of a guarantee is limited to
333extending the ending date or event; therefore, the developer
334does not have the option of changing the level of assessments
335guaranteed.
336     (3)  The stated dollar amount of the guarantee shall be an
337exact dollar amount for each parcel identified in the
338declaration. Regardless of the stated dollar amount of the
339guarantee, assessments charged to a member shall not exceed the
340maximum obligation of the member based on the total amount of
341the adopted budget and the member's proportionate ownership
342share of the common elements.
343     (4)  The cash payments required from the guarantor during
344the guarantee period shall be determined as follows:
345     (a)  If at any time during the guarantee period the funds
346collected from member assessments at the guaranteed level and
347other revenues collected by the association are not sufficient
348to provide payment, on a timely basis, of all common expenses,
349including the full funding of the reserves unless properly
350waived, the guarantor shall advance sufficient cash to the
351association at the time such payments are due.
352     (b)  Expenses incurred in the production of non-assessment
353revenues, which expenses are not in excess of the non-assessment
354revenues, shall not be included in the common expenses. If the
355expenses attributable to non-assessment revenues exceed non-
356assessment revenues, only the excess expenses must be funded by
357the guarantor. For example, if the association operates a rental
358program in which rental expenses exceed rental revenues, the
359guarantor shall fund the rental expenses in excess of the rental
360revenues. Interest earned on the investment of association funds
361may be used to pay the income tax expense incurred as a result
362of the investment, such expense shall not be charged to the
363guarantor, and the net investment income shall be retained by
364the association. Each such non-assessment revenue-generating
365activity shall be considered separately. Capital contributions
366collected from members are not revenues and shall not be used to
367pay common expenses.
368     (5)  The guarantor's total financial obligation to the
369association at the end of the guarantee period shall be
370determined on the accrual basis using the following formula: the
371guarantor shall fund the total common expenses incurred during
372the guarantee period, including the full funding of the reserves
373unless properly waived, less the total regular periodic
374assessments earned by the association from the members other
375than the guarantor during the guarantee period, regardless of
376whether the actual level charged was less than the maximum
377guaranteed amount.
378     (6)  Expenses incurred in the production of non-assessment
379revenues, which expenses are not in excess of the non-assessment
380revenues, shall not be included in the common expenses. If the
381expenses attributable to non-assessment revenues exceed non-
382assessment revenues, only the excess expenses must be funded by
383the guarantor. For example, if the association operates a rental
384program in which rental expenses exceed rental revenues, the
385guarantor shall fund the rental expenses in excess of the rental
386revenues. Interest earned on the investment of association funds
387may be used to pay the income tax expense incurred as a result
388of the investment, such expense shall not be charged to the
389guarantor, and the net investment income shall be retained by
390the association. Each such non-assessment revenue-generating
391activity shall be considered separately. Capital contributions
392collected from members are not revenues and shall not be used to
393pay common expenses.
394     Section 4.  This act shall take effect July 1, 2006.


CODING: Words stricken are deletions; words underlined are additions.