Senate Bill sb0396e1

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  1                      A bill to be entitled

  2         An act relating to real property; amending s.

  3         215.555, F.S.; redefining the term "covered

  4         policy" for purposes of the Florida Hurricane

  5         Catastrophe Fund to include commercial

  6         self-insurance funds; amending s. 718.103,

  7         F.S.; redefining the term "land"; amending s.

  8         718.111, F.S.; specifying that requirements

  9         relating to acquisition and maintenance of

10         adequate insurance apply to all residential

11         condominiums; amending s. 718.115, F.S.;

12         providing that common expenses include the

13         costs of certain insurance or self-insurance;

14         amending s. 718.116, F.S.; requiring notice of

15         special assessments for certain insurance;

16         amending s. 718.503, F.S.; requiring additional

17         disclosures in contracts for sale or lease of

18         residential units; requiring copies of budgets

19         to be furnished to buyers when a closing occurs

20         more than 12 months after an offering circular

21         is filed with the state; amending s. 718.504,

22         F.S.; requiring certain information relating to

23         the budget to be included in the offering

24         circular; requiring that an association budget

25         be prepared in good faith; amending s. 718.616,

26         F.S.; requiring that certain disclosures be

27         compiled in a report; revising the items

28         required to be disclosed; requiring

29         supplemental reports in certain situations;

30         amending s. 718.618, F.S.; revising certain

31         requirements for reserve accounts; revising the


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 1         method of computing the amounts required to

 2         fund additional converter reserve accounts;

 3         deleting references to specific items that are

 4         covered by an implied warranty of fitness in

 5         the absence of reserve accounts; requiring that

 6         a developer disclose in a contract of sale

 7         compliance with certain obligations regarding

 8         the maintenance of improvements; amending s.

 9         719.104, F.S.; providing for cooperative

10         associations and similar organizations to

11         acquire and maintain windstorm insurance;

12         amending s. 719.107, F.S.; providing that

13         common expenses include costs of certain

14         insurance; amending s. 719.108, F.S.; providing

15         for notice of special assessments levied in

16         conjunction with certain insurance; amending s.

17         719.503, F.S.; requiring additional disclosures

18         in contracts for sale or lease of residential

19         units; requiring copies of budgets to be

20         furnished to buyers when a closing occurs more

21         than 12 months after an offering circular is

22         filed with the state; amending s. 719.504,

23         F.S.; requiring certain information relating to

24         the budget to be included in the offering

25         circular; requiring that an association budget

26         be prepared in good faith; amending s. 720.303,

27         F.S.; providing for homeowners' associations to

28         acquire and maintain windstorm insurance;

29         amending s. 720.308, F.S.; providing for

30         homeowners' associations to levy assessments

31         for insurance; providing an effective date.


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 1  Be It Enacted by the Legislature of the State of Florida:

 2  

 3         Section 1.  Paragraph (c) of subsection (2) of section

 4  215.555, Florida Statutes, as amended by section 2 of chapter

 5  2007-1, Laws of Florida, is amended to read:

 6         215.555  Florida Hurricane Catastrophe Fund.--

 7         (2)  DEFINITIONS.--As used in this section:

 8         (c)  "Covered policy" means any insurance policy

 9  covering residential property in this state, including, but

10  not limited to, any homeowner's, mobile home owner's, farm

11  owner's, condominium association, condominium unit owner's,

12  tenant's, or apartment building policy, or any other policy

13  covering a residential structure or its contents issued by any

14  authorized insurer, including a commercial self-insurance fund

15  holding a certificate of authority issued by the Office of

16  Insurance Regulation under s. 624.462, the Citizens Property

17  Insurance Corporation, and any joint underwriting association

18  or similar entity created under pursuant to law. The term

19  "covered policy" includes any collateral protection insurance

20  policy covering personal residences which protects both the

21  borrower's and the lender's financial interests, in an amount

22  at least equal to the coverage for the dwelling in place under

23  the lapsed homeowner's policy, if such policy can be

24  accurately reported as required in subsection (5).

25  Additionally, covered policies include policies covering the

26  peril of wind removed from the Florida Residential Property

27  and Casualty Joint Underwriting Association or from the

28  Citizens Property Insurance Corporation, created under

29  pursuant to s. 627.351(6), or from the Florida Windstorm

30  Underwriting Association, created under pursuant to s.

31  627.351(2), by an authorized insurer under the terms and


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 1  conditions of an executed assumption agreement between the

 2  authorized insurer and such association or Citizens Property

 3  Insurance Corporation. Each assumption agreement between the

 4  association and such authorized insurer or Citizens Property

 5  Insurance Corporation must be approved by the Office of

 6  Insurance Regulation before prior to the effective date of the

 7  assumption, and the Office of Insurance Regulation must

 8  provide written notification to the board within 15 working

 9  days after such approval. "Covered policy" does not include

10  any policy that excludes wind coverage or hurricane coverage

11  or any reinsurance agreement and does not include any policy

12  otherwise meeting this definition which is issued by a surplus

13  lines insurer or a reinsurer. All commercial residential

14  excess policies and all deductible buy-back policies that,

15  based on sound actuarial principles, require individual

16  ratemaking shall be excluded by rule if the actuarial

17  soundness of the fund is not jeopardized. For this purpose,

18  the term "excess policy" means a policy that provides

19  insurance protection for large commercial property risks and

20  that provides a layer of coverage above a primary layer

21  insured by another insurer.

22         Section 2.  Subsection (18) of section 718.103, Florida

23  Statutes, is amended to read:

24         718.103  Definitions.--As used in this chapter, the

25  term:

26         (18)  "Land" means the surface of a legally described

27  parcel of real property and includes, unless otherwise

28  specified in the declaration and whether separate from or

29  including such surface, airspace lying above and subterranean

30  space lying below such surface.  However, if so defined in the

31  declaration, the term "land" may mean all or any portion of


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 1  the airspace or subterranean space between two legally

 2  identifiable elevations and may exclude the surface of a

 3  parcel of real property and may mean any combination of the

 4  foregoing, whether or not contiguous, or may mean a

 5  condominium unit.

 6         Section 3.  Subsection (11) of section 718.111, Florida

 7  Statutes, as amended by section 37 of chapter 2007-1, Laws of

 8  Florida, is amended to read:

 9         718.111  The association.--

10         (11)  INSURANCE.--In order to protect the safety,

11  health, and welfare of the people of the State of Florida and

12  to ensure consistency in the provision of insurance coverage

13  to condominiums and their unit owners, paragraphs (a), (b),

14  and (c) are deemed to apply to every residential condominium

15  in the state, regardless of the date of its declaration of

16  condominium. It is the intent of the Legislature to encourage

17  lower or stable insurance premiums for associations described

18  in this section. Therefore, the Legislature requires a report

19  to be prepared by the Office of Insurance Regulation of the

20  Department of Financial Services for publication 18 months

21  from the effective date of this act, evaluating premium

22  increases or decreases for associations, unit owner premium

23  increases or decreases, recommended changes to better define

24  common areas, or any other information the Office of Insurance

25  Regulation deems appropriate.

26         (a)  A unit-owner controlled association operating a

27  residential condominium shall use its best efforts to obtain

28  and maintain adequate insurance to protect the association,

29  the association property, the common elements, and the

30  condominium property required to be insured by the association

31  pursuant to paragraph (b). If the association is developer


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 1  controlled, the association shall exercise due diligence to

 2  obtain and maintain such insurance. Failure to obtain and

 3  maintain adequate insurance during any period of developer

 4  control shall constitute a breach of fiduciary responsibility

 5  by the developer-appointed members of the board of directors

 6  of the association, unless said members can show that despite

 7  such failure, they have exercised due diligence. The

 8  declaration of condominium as originally recorded, or amended

 9  pursuant to procedures provided therein, may require that

10  condominium property consisting of freestanding buildings

11  where there is no more than one building in or on such unit

12  need not be insured by the association if the declaration

13  requires the unit owner to obtain adequate insurance for the

14  condominium property. An association may also obtain and

15  maintain liability insurance for directors and officers,

16  insurance for the benefit of association employees, and flood

17  insurance for common elements, association property, and

18  units. Adequate insurance, regardless of any requirement in

19  the declaration of condominium for coverage by the association

20  for "full insurable value," "replacement cost," or the like,

21  may include reasonable deductibles as determined by the board

22  based upon available funds or predetermined assessment

23  authority at the time that the insurance is obtained.

24         1.  Windstorm insurance coverage for a group of no

25  fewer than three communities created and operating under this

26  chapter, chapter 719, chapter 720, or chapter 721 may be

27  obtained and maintained for the communities if the insurance

28  coverage is sufficient to cover an amount equal to the

29  probable maximum loss for the communities for a 250-year

30  windstorm event. Such probable maximum loss must be determined

31  through the use of a competent model that has been accepted by


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 1  the Florida Commission on Hurricane Loss Projection

 2  Methodology. Such insurance coverage is deemed adequate

 3  windstorm insurance for the purposes of this section.

 4         2.  An association or group of associations may

 5  self-insure against claims against the association, the

 6  association property, and the condominium property required to

 7  be insured by an association, upon compliance with the

 8  applicable provisions of ss. 624.460-624.488, which shall be

 9  considered adequate insurance for the purposes of this

10  section. A copy of each policy of insurance in effect shall be

11  made available for inspection by unit owners at reasonable

12  times.

13         (b)  Every hazard insurance policy issued or renewed on

14  or after January 1, 2004, to protect the condominium shall

15  provide primary coverage for:

16         1.  All portions of the condominium property located

17  outside the units;

18         2.  The condominium property located inside the units

19  as such property was initially installed, or replacements

20  thereof of like kind and quality and in accordance with the

21  original plans and specifications or, if the original plans

22  and specifications are not available, as they existed at the

23  time the unit was initially conveyed; and

24         3.  All portions of the condominium property for which

25  the declaration of condominium requires coverage by the

26  association.

27  

28  Anything to the contrary notwithstanding, the terms

29  "condominium property," "building," "improvements," "insurable

30  improvements," "common elements," "association property," or

31  any other term found in the declaration of condominium which


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 1  defines the scope of property or casualty insurance that a

 2  condominium association must obtain shall exclude all floor,

 3  wall, and ceiling coverings, electrical fixtures, appliances,

 4  air conditioner or heating equipment, water heaters, water

 5  filters, built-in cabinets and countertops, and window

 6  treatments, including curtains, drapes, blinds, hardware, and

 7  similar window treatment components, or replacements of any of

 8  the foregoing which are located within the boundaries of a

 9  unit and serve only one unit and all air conditioning

10  compressors that service only an individual unit, whether or

11  not located within the unit boundaries. The foregoing is

12  intended to establish the property or casualty insuring

13  responsibilities of the association and those of the

14  individual unit owner and do not serve to broaden or extend

15  the perils of coverage afforded by any insurance contract

16  provided to the individual unit owner. Beginning January 1,

17  2004, the association shall have the authority to amend the

18  declaration of condominium, without regard to any requirement

19  for mortgagee approval of amendments affecting insurance

20  requirements, to conform the declaration of condominium to the

21  coverage requirements of this section.

22         (c)  Every hazard insurance policy issued or renewed on

23  or after January 1, 2004, to an individual unit owner shall

24  provide that the coverage afforded by such policy is excess

25  over the amount recoverable under any other policy covering

26  the same property. Each insurance policy issued to an

27  individual unit owner providing such coverage shall be without

28  rights of subrogation against the condominium association that

29  operates the condominium in which such unit owner's unit is

30  located. All real or personal property located within the

31  boundaries of the unit owner's unit which is excluded from the


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 1  coverage to be provided by the association as set forth in

 2  paragraph (b) shall be insured by the individual unit owner.

 3         (d)  The association shall obtain and maintain adequate

 4  insurance or fidelity bonding of all persons who control or

 5  disburse funds of the association. The insurance policy or

 6  fidelity bond must cover the maximum funds that will be in the

 7  custody of the association or its management agent at any one

 8  time. As used in this paragraph, the term "persons who control

 9  or disburse funds of the association" includes, but is not

10  limited to, those individuals authorized to sign checks and

11  the president, secretary, and treasurer of the association.

12  The association shall bear the cost of bonding.

13         Section 4.  Present paragraph (f) of subsection (1) of

14  section 718.115, Florida Statutes, is redesignated as

15  paragraph (g), and a new paragraph (f) is added to that

16  subsection to read:

17         718.115  Common expenses and common surplus.--

18         (1)

19         (f)  Common expenses include the costs of insurance

20  acquired by the association under the authority of s.

21  718.111(11), including costs and contingent expenses required

22  to participate in a self-insurance fund authorized and

23  approved pursuant to s. 624.462.

24         Section 5.  Subsection (10) of section 718.116, Florida

25  Statutes, is amended to read:

26         718.116  Assessments; liability; lien and priority;

27  interest; collection.--

28         (10)  The specific purpose or purposes of any special

29  assessment, including any contingent special assessment levied

30  in conjunction with the purchase of an insurance policy

31  authorized by s. 718.111(11), approved in accordance with the


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 1  condominium documents shall be set forth in a written notice

 2  of such assessment sent or delivered to each unit owner.  The

 3  funds collected pursuant to a special assessment shall be used

 4  only for the specific purpose or purposes set forth in such

 5  notice. However, upon completion of such specific purpose or

 6  purposes, any excess funds will be considered common surplus,

 7  and may, at the discretion of the board, either be returned to

 8  the unit owners or applied as a credit toward future

 9  assessments.

10         Section 6.  Paragraph (a) of subsection (1) of section

11  718.503, Florida Statutes, is amended, and paragraph (c) is

12  added to that subsection, to read:

13         718.503  Developer disclosure prior to sale;

14  nondeveloper unit owner disclosure prior to sale;

15  voidability.--

16         (1)  DEVELOPER DISCLOSURE.--

17         (a)  Contents of contracts.--Any contract for the sale

18  of a residential unit or a lease thereof for an unexpired term

19  of more than 5 years shall:

20         1.  Contain the following legend in conspicuous type:

21  THIS AGREEMENT IS VOIDABLE BY BUYER BY DELIVERING WRITTEN

22  NOTICE OF THE BUYER'S INTENTION TO CANCEL WITHIN 15 DAYS AFTER

23  THE DATE OF EXECUTION OF THIS AGREEMENT BY THE BUYER, AND

24  RECEIPT BY BUYER OF ALL OF THE ITEMS REQUIRED TO BE DELIVERED

25  TO HIM OR HER BY THE DEVELOPER UNDER SECTION 718.503, FLORIDA

26  STATUTES.  THIS AGREEMENT IS ALSO VOIDABLE BY BUYER BY

27  DELIVERING WRITTEN NOTICE OF THE BUYER'S INTENTION TO CANCEL

28  WITHIN 15 DAYS AFTER THE DATE OF RECEIPT FROM THE DEVELOPER OF

29  ANY AMENDMENT WHICH MATERIALLY ALTERS OR MODIFIES THE OFFERING

30  IN A MANNER THAT IS ADVERSE TO THE BUYER.  ANY PURPORTED

31  WAIVER OF THESE VOIDABILITY RIGHTS SHALL BE OF NO EFFECT.


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 1  BUYER MAY EXTEND THE TIME FOR CLOSING FOR A PERIOD OF NOT MORE

 2  THAN 15 DAYS AFTER THE BUYER HAS RECEIVED ALL OF THE ITEMS

 3  REQUIRED.  BUYER'S RIGHT TO VOID THIS AGREEMENT SHALL

 4  TERMINATE AT CLOSING. FIGURES CONTAINED IN ANY BUDGET

 5  DELIVERED TO THE BUYER PREPARED IN ACCORDANCE WITH THE

 6  CONDOMINIUM ACT ARE ESTIMATES ONLY AND REPRESENT AN

 7  APPROXIMATION OF FUTURE EXPENSES BASED ON FACTS AND

 8  CIRCUMSTANCES EXISTING AT THE TIME OF THE PREPARATION OF THE

 9  BUDGET BY THE DEVELOPER. ACTUAL COSTS OF SUCH ITEMS MAY EXCEED

10  THE ESTIMATED COSTS. SUCH CHANGES IN COST DO NOT CONSTITUTE

11  MATERIAL ADVERSE CHANGES IN THE OFFERING.

12         2.  Contain the following caveat in conspicuous type on

13  the first page of the contract:  ORAL REPRESENTATIONS CANNOT

14  BE RELIED UPON AS CORRECTLY STATING THE REPRESENTATIONS OF THE

15  DEVELOPER.  FOR CORRECT REPRESENTATIONS, REFERENCE SHOULD BE

16  MADE TO THIS CONTRACT AND THE DOCUMENTS REQUIRED BY SECTION

17  718.503, FLORIDA STATUTES, TO BE FURNISHED BY A DEVELOPER TO A

18  BUYER OR LESSEE.

19         3.  If the unit has been occupied by someone other than

20  the buyer, contain a statement that the unit has been

21  occupied.

22         4.  If the contract is for the sale or transfer of a

23  unit subject to a lease, include as an exhibit a copy of the

24  executed lease and shall contain within the text in

25  conspicuous type:  THE UNIT IS SUBJECT TO A LEASE (OR

26  SUBLEASE).

27         5.  If the contract is for the lease of a unit for a

28  term of 5 years or more, include as an exhibit a copy of the

29  proposed lease.

30         6.  If the contract is for the sale or lease of a unit

31  that is subject to a lien for rent payable under a lease of a


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 1  recreational facility or other commonly used facility, contain

 2  within the text the following statement in conspicuous type:

 3  THIS CONTRACT IS FOR THE TRANSFER OF A UNIT THAT IS SUBJECT TO

 4  A LIEN FOR RENT PAYABLE UNDER A LEASE OF COMMONLY USED

 5  FACILITIES. FAILURE TO PAY RENT MAY RESULT IN FORECLOSURE OF

 6  THE LIEN.

 7         7.  State the name and address of the escrow agent

 8  required by s. 718.202 and state that the purchaser may obtain

 9  a receipt for his or her deposit from the escrow agent upon

10  request.

11         8.  If the contract is for the sale or transfer of a

12  unit in a condominium in which timeshare estates have been or

13  may be created, contain within the text in conspicuous type:

14  UNITS IN THIS CONDOMINIUM ARE SUBJECT TO TIMESHARE ESTATES.

15  The contract for the sale of a fee interest in a timeshare

16  estate shall also contain, in conspicuous type, the following:

17  FOR THE PURPOSE OF AD VALOREM TAXES OR SPECIAL ASSESSMENTS

18  LEVIED BY TAXING AUTHORITIES AGAINST A FEE INTEREST IN A

19  TIMESHARE ESTATE, THE MANAGING ENTITY IS GENERALLY CONSIDERED

20  THE TAXPAYER UNDER FLORIDA LAW.  YOU HAVE THE RIGHT TO

21  CHALLENGE AN ASSESSMENT BY A TAXING AUTHORITY RELATING TO YOUR

22  TIMESHARE ESTATE PURSUANT TO THE PROVISIONS OF CHAPTER 194,

23  FLORIDA STATUTES.

24         (c)  Subsequent estimates; when provided.--If the

25  closing on a contract occurs more than 12 months after the

26  filing of the offering circular with the division, the

27  developer shall provide a copy of the current estimated

28  operating budget of the association to the buyer at closing,

29  which shall not be considered an amendment that modifies the

30  offering provided any changes to the association's budget from

31  the budget given to the buyer at the time of contract signing


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 1  were the result of matters beyond the developer's control.

 2  Changes in budgets of any master association, recreation

 3  association, or club and similar budgets for entities other

 4  than the association shall likewise not be considered

 5  amendments that modify the offering. It is the intent of this

 6  paragraph to clarify existing law.

 7         Section 7.  Present paragraph (d) of subsection (21) of

 8  section 718.504, Florida Statutes, is redesignated as

 9  paragraph (f) and new paragraphs (d) and (e) are added to that

10  subsection to read:

11         718.504  Prospectus or offering circular.--Every

12  developer of a residential condominium which contains more

13  than 20 residential units, or which is part of a group of

14  residential condominiums which will be served by property to

15  be used in common by unit owners of more than 20 residential

16  units, shall prepare a prospectus or offering circular and

17  file it with the Division of Florida Land Sales, Condominiums,

18  and Mobile Homes prior to entering into an enforceable

19  contract of purchase and sale of any unit or lease of a unit

20  for more than 5 years and shall furnish a copy of the

21  prospectus or offering circular to each buyer.  In addition to

22  the prospectus or offering circular, each buyer shall be

23  furnished a separate page entitled "Frequently Asked Questions

24  and Answers," which shall be in accordance with a format

25  approved by the division and a copy of the financial

26  information required by s. 718.111.  This page shall, in

27  readable language, inform prospective purchasers regarding

28  their voting rights and unit use restrictions, including

29  restrictions on the leasing of a unit; shall indicate whether

30  and in what amount the unit owners or the association is

31  obligated to pay rent or land use fees for recreational or


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 1  other commonly used facilities; shall contain a statement

 2  identifying that amount of assessment which, pursuant to the

 3  budget, would be levied upon each unit type, exclusive of any

 4  special assessments, and which shall further identify the

 5  basis upon which assessments are levied, whether monthly,

 6  quarterly, or otherwise; shall state and identify any court

 7  cases in which the association is currently a party of record

 8  in which the association may face liability in excess of

 9  $100,000; and which shall further state whether membership in

10  a recreational facilities association is mandatory, and if so,

11  shall identify the fees currently charged per unit type.  The

12  division shall by rule require such other disclosure as in its

13  judgment will assist prospective purchasers. The prospectus or

14  offering circular may include more than one condominium,

15  although not all such units are being offered for sale as of

16  the date of the prospectus or offering circular.  The

17  prospectus or offering circular must contain the following

18  information:

19         (21)  An estimated operating budget for the condominium

20  and the association, and a schedule of the unit owner's

21  expenses shall be attached as an exhibit and shall contain the

22  following information:

23         (d)  The following statement in conspicuous type:  THE

24  BUDGET CONTAINED IN THIS OFFERING CIRCULAR HAS BEEN PREPARED

25  IN ACCORDANCE WITH THE CONDOMINIUM ACT AND IS A GOOD FAITH

26  ESTIMATE ONLY AND REPRESENTS AN APPROXIMATION OF FUTURE

27  EXPENSES BASED ON FACTS AND CIRCUMSTANCES EXISTING AT THE TIME

28  OF ITS PREPARATION. ACTUAL COSTS OF SUCH ITEMS MAY EXCEED THE

29  ESTIMATED COSTS. SUCH CHANGES IN COST DO NOT CONSTITUTE

30  MATERIAL ADVERSE CHANGES IN THE OFFERING.

31  


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 1         (e)  Each budget for an association prepared by a

 2  developer consistent with this subsection shall be prepared in

 3  good faith and shall reflect accurate estimated amounts for

 4  the required items in paragraph (c) at the time of the filing

 5  of the offering circular with the division, and subsequent

 6  increased amounts of any item included in the association's

 7  estimated budget which are beyond the control of the developer

 8  shall not be considered an amendment that would give rise to

 9  recission rights set forth in s. 718.503(1)(a) or (b), nor

10  shall such increases modify, void, or otherwise affect any

11  guarantee of the developer contained in the offering circular

12  or any purchase contract. It is the intent of this paragraph

13  to clarify existing law.

14         Section 8.  Section 718.616, Florida Statutes, is

15  amended to read:

16         718.616  Disclosure of condition of building and

17  estimated replacement costs and notification of

18  municipalities.--

19         (1)  Each developer of a residential condominium

20  created by converting existing, previously occupied

21  improvements to such form of ownership shall prepare a report

22  that discloses disclose the condition of the improvements and

23  the condition of certain components and their current

24  estimated replacement costs as of the date of the report.

25         (2)  The following information shall be stated

26  concerning the improvements:

27         (a)  The date and type of construction.

28         (b)  The prior use.

29         (c)  Whether there is termite damage or infestation and

30  whether the termite damage or infestation, if any, has been

31  properly treated.  The statement shall be substantiated by


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 1  including, as an exhibit, an inspection report by a certified

 2  pest control operator.

 3         (3)(a)  Disclosure of condition shall be made for each

 4  of the following components that the existing improvements may

 5  include:

 6         1.  Roof.

 7         2.  Structure.

 8         3.  Fireproofing and Fire protection systems.

 9         4.  Elevators.

10         5.  Heating and cooling systems.

11         6.  Plumbing.

12         7.  Electrical systems.

13         8.  Swimming pool.

14         9.  Seawalls, pilings, and docks.

15         10.  Pavement and concrete, including roadways,

16  walkways, and parking areas.

17         11.  Drainage systems.

18         12.  Irrigation systems.

19         (b)  For each component, the following information

20  shall be disclosed and substantiated by attaching a copy of a

21  certificate under seal of an architect or engineer authorized

22  to practice in this state:

23         1.  The age of the component as of the date of the

24  report.

25         2.  The estimated remaining useful life of the

26  component as of the date of the report.

27         3.  The estimated current replacement cost of the

28  component as of the date of the report, expressed:

29         a.  As a total amount; and

30         b.  As a per-unit amount, based upon each unit's

31  proportional share of the common expenses.


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    CS for CS for SB 396                           First Engrossed



 1         4.  The structural and functional soundness of the

 2  component.

 3         (c)  Each unit owner and the association are

 4  third-party beneficiaries of the report.

 5         (d)  A supplemental report shall be prepared for any

 6  structure or component that is renovated or repaired after

 7  completion of the original report and prior to the recording

 8  of the declaration of condominium. If the declaration is not

 9  recorded within 1 year after the date of the original report,

10  the developer shall update the report annually prior to

11  recording the declaration of condominium.

12         (e)  The report may not contain representations on

13  behalf of the development concerning future improvements or

14  repairs and must be limited to the current condition of the

15  improvements.

16         (4)  If the proposed condominium is situated within a

17  municipality, the disclosure shall include a letter from the

18  municipality acknowledging that the municipality has been

19  notified of the proposed creation of a residential condominium

20  by conversion of existing, previously occupied improvements

21  and, in any county, as defined in s. 125.011(1), acknowledging

22  compliance with applicable zoning requirements as determined

23  by the municipality.

24         Section 9.  Section 718.618, Florida Statutes, is

25  amended to read:

26         718.618  Converter reserve accounts; warranties.--

27         (1)  When existing improvements are converted to

28  ownership as a residential condominium, the developer shall

29  establish converter reserve accounts for capital expenditures

30  and deferred maintenance, or give warranties as provided by

31  subsection (6), or post a surety bond as provided by


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    CS for CS for SB 396                           First Engrossed



 1  subsection (7). The developer shall fund the converter reserve

 2  accounts in amounts calculated as follows:

 3         (a)1.  When the existing improvements include an

 4  air-conditioning system serving more than one unit or property

 5  which the association is responsible to repair, maintain, or

 6  replace, the developer shall fund an air-conditioning reserve

 7  account. The amount of the reserve account shall be the

 8  product of the estimated current replacement cost of the

 9  system, as disclosed and substantiated pursuant to s.

10  718.616(3)(b), multiplied by a fraction, the numerator of

11  which shall be the lesser of the age of the system in years or

12  9, and the denominator of which shall be 10. When such

13  air-conditioning system is within 1,000 yards of the seacoast,

14  the numerator shall be the lesser of the age of the system in

15  years or 3, and the denominator shall be 4.

16         2.  The developer shall fund a plumbing reserve

17  account. The amount of the funding shall be the product of the

18  estimated current replacement cost of the plumbing component,

19  as disclosed and substantiated pursuant to s. 718.616(3)(b),

20  multiplied by a fraction, the numerator of which shall be the

21  lesser of the age of the plumbing in years or 36, and the

22  denominator of which shall be 40.

23         3.  The developer shall fund a roof reserve account.

24  The amount of the funding shall be the product of the

25  estimated current replacement cost of the roofing component,

26  as disclosed and substantiated pursuant to s. 718.616(3)(b),

27  multiplied by a fraction, the numerator of which shall be the

28  lesser of the age of the roof in years or the numerator listed

29  in the following table. The denominator of the fraction shall

30  be determined based on the roof type, as follows:

31  


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    CS for CS for SB 396                           First Engrossed



 1      Roof Type                  Numerator   Denominator

 2      

 3  a.  Built-up roof

 4      without insulation             4            5

 5  b.  Built-up roof

 6      with insulation                4            5

 7  c.  Cement tile roof              45           50

 8  d.  Asphalt shingle roof          14           15

 9  e.  Copper roof

10  f.  Wood shingle roof              9           10

11  g.  All other types               18           20

12  

13         (b)  The age of any component or structure for which

14  the developer is required to fund a reserve account shall be

15  measured in years, rounded to the nearest whole year. The

16  amount of converter reserves to be funded by the developer for

17  each structure or component shall be based on the age of the

18  structure or component as disclosed in the inspection report.

19  The architect or engineer shall determine the age of the

20  component from the later of:

21         1.  The date when the component or structure was

22  replaced or substantially renewed, if the replacement or

23  renewal of the component at least met the requirements of the

24  then-applicable building code; or

25         2.  The date when the installation or construction of

26  the existing component or structure was completed.

27         (c)  When the age of a component or structure is to be

28  measured from the date of replacement or renewal, the

29  developer shall provide the division with a certificate, under

30  the seal of an architect or engineer authorized to practice in

31  this state, verifying:


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    CS for CS for SB 396                           First Engrossed



 1         1.  The date of the replacement or renewal; and

 2         2.  That the replacement or renewal at least met the

 3  requirements of the then-applicable building code.

 4         (d)  In addition to establishing the reserve accounts

 5  specified above, the developer shall establish those other

 6  reserve accounts required by s. 718.112(2)(f), and shall fund

 7  those accounts in accordance with the formula provided

 8  therein. The vote to waive or reduce the funding or reserves

 9  required by s. 718.112(2)(f) does not affect or negate the

10  obligations arising under this section.

11         (2)(a)  The developer shall fund the reserve account

12  required by subsection (1), on a pro rata basis upon the sale

13  of each unit. The developer shall deposit in the reserve

14  account not less than a percentage of the total amount to be

15  deposited in the reserve account equal to the percentage of

16  ownership of the common elements allocable to the unit sold.

17  When a developer deposits amounts in excess of the minimum

18  reserve account funding, later deposits may be reduced to the

19  extent of the excess funding. For the purposes of this

20  subsection, a unit is considered sold when a fee interest in

21  the unit is transferred to a third party or the unit is leased

22  for a period in excess of 5 years.

23         (b)  When an association makes an expenditure of

24  converter reserve account funds before the developer has sold

25  all units, the developer shall make a deposit in the reserve

26  account. Such deposit shall be at least equal to that portion

27  of the expenditure which would be charged against the reserve

28  account deposit that would have been made for any such unit

29  had the unit been sold. Such deposit may be reduced to the

30  extent the developer has funded the reserve account in excess

31  of the minimum reserve account funding required by this


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    CS for CS for SB 396                           First Engrossed



 1  subsection. This paragraph applies only when the developer has

 2  funded reserve accounts as provided by paragraph (a).

 3         (3)  The use of reserve account funds, as provided in

 4  this section, is limited as follows:

 5         (a)  Reserve account funds may be spent prior to the

 6  assumption of control of the association by unit owners other

 7  than the developer; and

 8         (b)  Reserve account funds may be expended only for

 9  repair or replacement of the specific components for which the

10  funds were deposited, unless, after assumption of control of

11  the association by unit owners other than the developer, it is

12  determined by three-fourths of the voting interests in the

13  condominium to expend the funds for other purposes.

14         (4)  The developer shall establish the reserve account,

15  as provided in this section, in the name of the association at

16  a bank, savings and loan association, or trust company located

17  in this state.

18         (5)  A developer may establish and fund additional

19  converter reserve accounts. The amount of funding shall be the

20  product of the estimated current replacement cost of a

21  component, as disclosed and substantiated pursuant to s.

22  718.616(3)(b), multiplied by a  fraction, the numerator of

23  which is the age of the component in years and the denominator

24  of which is the total estimated life of the component in

25  years.

26         (6)  A developer makes no implied warranties when

27  existing improvements are converted to ownership as a

28  residential condominium and reserve accounts are funded in

29  accordance with this section. As an alternative to

30  establishing such reserve accounts, or when a developer fails

31  to establish the reserve accounts in accordance with this


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    CS for CS for SB 396                           First Engrossed



 1  section, the developer shall be deemed to have granted to the

 2  purchaser of each unit an implied warranty of fitness and

 3  merchantability for the purposes or uses intended, as to the

 4  roof and structural components of the improvements; as to

 5  fireproofing and fire protection systems; and as to

 6  mechanical, electrical, and plumbing elements serving the

 7  improvements, except mechanical elements serving only one

 8  unit. The warranty shall be for a period beginning with the

 9  notice of intended conversion and continuing for 3 years

10  thereafter, or the recording of the declaration to condominium

11  and continuing for 3 years thereafter, or 1 year after owners

12  other than the developer obtain control of the association,

13  whichever occurs last, but in no event more than 5 years.

14         (a)  The warranty provided for in this section is

15  conditioned upon routine maintenance being performed, unless

16  the maintenance is an obligation of the developer or a

17  developer-controlled association.

18         (b)  The warranty shall inure to the benefit of each

19  owner and successor owner.

20         (c)  Existing improvements converted to residential

21  condominium may be covered by an insured warranty program

22  underwritten by an insurance company authorized to do business

23  in this state, if such warranty program meets the minimum

24  requirements of this chapter. To the degree that the warranty

25  program does not meet the minimum requirements of this

26  chapter, such requirements shall apply.

27         (7)  When a developer desires to post a surety bond,

28  the developer shall, after notification to the buyer, acquire

29  a surety bond issued by a company licensed to do business in

30  this state, if such a bond is readily available in the open

31  market, in an amount which would be equal to the total amount


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    CS for CS for SB 396                           First Engrossed



 1  of all reserve accounts required under subsection (1), payable

 2  to the association.

 3         (8)  The amended provisions of this section do not

 4  affect a conversion of existing improvements when a developer

 5  has filed a notice of intended conversion and the documents

 6  required by s. 718.503 or s. 718.504, as applicable, with the

 7  division prior to the effective date of this law, provided:

 8         (a)  The documents are proper for filing purposes.

 9         (b)  The developer, not later than 6 months after such

10  filing:

11         1.  Records a declaration for such filing in accordance

12  with part I.

13         2.  Gives a notice of intended conversion.

14         (9)  This section applies only to the conversion of

15  existing improvements where construction of the improvement

16  was commenced prior to its designation by the developer as a

17  condominium. In such circumstances, s. 718.203 does not apply.

18         (10)  A developer who sells a condominium parcel that

19  is subject to this part shall disclose in conspicuous type in

20  the contract of sale whether the developer has established

21  converter reserve accounts, provided a warranty of fitness and

22  merchantability, or posted a surety bond for purposes of

23  complying with this section.

24         Section 10.  Subsection (3) of section 719.104, Florida

25  Statutes, is amended to read:

26         719.104  Cooperatives; access to units; records;

27  financial reports; assessments; purchase of leases.--

28         (3)  INSURANCE.--The association shall use its best

29  efforts to obtain and maintain adequate insurance to protect

30  the association property. The association may also obtain and

31  maintain liability insurance for directors and officers,


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    CS for CS for SB 396                           First Engrossed



 1  insurance for the benefit of association employees, and flood

 2  insurance.  A copy of each policy of insurance in effect shall

 3  be made available for inspection by unit owners at reasonable

 4  times.

 5         (a)  Windstorm insurance coverage for a group of no

 6  fewer than three communities created and operating under

 7  chapter 718, this chapter, chapter 720, or chapter 721 may be

 8  obtained and maintained for the communities if the insurance

 9  coverage is sufficient to cover an amount equal to the

10  probable maximum loss for the communities for a 250-year

11  windstorm event. Such probable maximum loss must be determined

12  through the use of a competent model that has been accepted by

13  the Florida Commission on Hurricane Loss Projection

14  Methodology. Such insurance coverage is deemed adequate

15  windstorm insurance for the purposes of this section.

16         (b)  An association or group of associations may

17  self-insure against claims against the association, the

18  association property, and the cooperative property required to

19  be insured by an association, upon compliance with the

20  applicable provisions of ss. 624.460-624.488, which shall be

21  considered adequate insurance for purposes of this section.

22         Section 11.  Paragraph (e) is added to subsection (1)

23  of section 719.107, Florida Statutes, to read:

24         719.107  Common expenses; assessment.--

25         (1)

26         (e)  Common expenses include the costs of insurance

27  acquired by the association under the authority of s.

28  719.104(3), including costs and contingent expenses required

29  to participate in a self-insurance fund authorized and

30  approved pursuant to s. 624.462.

31  


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    CS for CS for SB 396                           First Engrossed



 1         Section 12.  Subsection (9) of section 719.108, Florida

 2  Statutes, is amended to read:

 3         719.108  Rents and assessments; liability; lien and

 4  priority; interest; collection; cooperative ownership.--

 5         (9)  The specific purposes of any special assessment,

 6  including any contingent special assessment levied in

 7  conjunction with the purchase of an insurance policy

 8  authorized by s. 719.104(3), approved in accordance with the

 9  cooperative documents shall be set forth in a written notice

10  of such assessment sent or delivered to each unit owner.  The

11  funds collected pursuant to a special assessment shall be used

12  only for the specific purpose or purposes set forth in such

13  notice or returned to the unit owners. However, upon

14  completion of such specific purposes, any excess funds shall

15  be considered common surplus and may, at the discretion of the

16  board, either be returned to the unit owners or applied as a

17  credit toward future assessments.

18         Section 13.  Paragraph (a) of subsection (1) of section

19  719.503, Florida Statutes, is amended, and paragraph (c) is

20  added to that subsection, to read:

21         719.503  Disclosure prior to sale.--

22         (1)  DEVELOPER DISCLOSURE.--

23         (a)  Contents of contracts.--Any contracts for the sale

24  of a unit or a lease thereof for an unexpired term of more

25  than 5 years shall contain:

26         1.  The following legend in conspicuous type: THIS

27  AGREEMENT IS VOIDABLE BY BUYER BY DELIVERING WRITTEN NOTICE OF

28  THE BUYER'S INTENTION TO CANCEL WITHIN 15 DAYS AFTER THE DATE

29  OF EXECUTION OF THIS AGREEMENT BY THE BUYER, AND RECEIPT BY

30  BUYER OF ALL OF THE ITEMS REQUIRED TO BE DELIVERED TO HIM OR

31  HER BY THE DEVELOPER UNDER SECTION 719.503, FLORIDA STATUTES.


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    CS for CS for SB 396                           First Engrossed



 1  THIS AGREEMENT IS ALSO VOIDABLE BY BUYER BY DELIVERING WRITTEN

 2  NOTICE OF THE BUYER'S INTENTION TO CANCEL WITHIN 15 DAYS AFTER

 3  THE DATE OF RECEIPT FROM THE DEVELOPER OF ANY AMENDMENT WHICH

 4  MATERIALLY ALTERS OR MODIFIES THE OFFERING IN A MANNER THAT IS

 5  ADVERSE TO THE BUYER.  ANY PURPORTED WAIVER OF THESE

 6  VOIDABILITY RIGHTS SHALL BE OF NO EFFECT. BUYER MAY EXTEND THE

 7  TIME FOR CLOSING FOR A PERIOD OF NOT MORE THAN 15 DAYS AFTER

 8  THE BUYER HAS RECEIVED ALL OF THE ITEMS REQUIRED.  BUYER'S

 9  RIGHT TO VOID THIS AGREEMENT SHALL TERMINATE AT CLOSING.

10  FIGURES CONTAINED IN ANY BUDGET DELIVERED TO THE BUYER

11  PREPARED IN ACCORDANCE WITH THE COOPERATIVE ACT ARE ESTIMATES

12  ONLY AND REPRESENT AN APPROXIMATION OF FUTURE EXPENSES BASED

13  ON FACTS AND CIRCUMSTANCES EXISTING AT THE TIME OF THE

14  PREPARATION OF THE BUDGET BY THE DEVELOPER. ACTUAL COSTS OF

15  SUCH ITEMS MAY EXCEED THE ESTIMATED COSTS. SUCH CHANGES IN

16  COST DO NOT CONSTITUTE MATERIAL ADVERSE CHANGES IN THE

17  OFFERING.

18         2.  The following caveat in conspicuous type shall be

19  placed upon the first page of the contract:  ORAL

20  REPRESENTATIONS CANNOT BE RELIED UPON AS CORRECTLY STATING THE

21  REPRESENTATIONS OF THE DEVELOPER.  FOR CORRECT

22  REPRESENTATIONS, REFERENCE SHOULD BE MADE TO THIS CONTRACT AND

23  THE DOCUMENTS REQUIRED BY SECTION 719.503, FLORIDA STATUTES,

24  TO BE FURNISHED BY A DEVELOPER TO A BUYER OR LESSEE.

25         3.  If the unit has been occupied by someone other than

26  the buyer, a statement that the unit has been occupied.

27         4.  If the contract is for the sale or transfer of a

28  unit subject to a lease, the contract shall include as an

29  exhibit a copy of the executed lease and shall contain within

30  the text in conspicuous type:  THE UNIT IS SUBJECT TO A LEASE

31  (OR SUBLEASE).


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    CS for CS for SB 396                           First Engrossed



 1         5.  If the contract is for the lease of a unit for a

 2  term of 5 years or more, the contract shall include as an

 3  exhibit a copy of the proposed lease.

 4         6.  If the contract is for the sale or lease of a unit

 5  that is subject to a lien for rent payable under a lease of a

 6  recreational facility or other common areas, the contract

 7  shall contain within the text the following statement in

 8  conspicuous type:  THIS CONTRACT IS FOR THE TRANSFER OF A UNIT

 9  THAT IS SUBJECT TO A LIEN FOR RENT PAYABLE UNDER A LEASE OF

10  COMMON AREAS. FAILURE TO PAY RENT MAY RESULT IN FORECLOSURE OF

11  THE LIEN.

12         7.  The contract shall state the name and address of

13  the escrow agent required by s. 719.202 and shall state that

14  the purchaser may obtain a receipt for his or her deposit from

15  the escrow agent, upon request.

16         8.  If the contract is for the sale or transfer of a

17  unit in a cooperative in which timeshare estates have been or

18  may be created, the following text in conspicuous type:  UNITS

19  IN THIS COOPERATIVE ARE SUBJECT TO TIMESHARE ESTATES. The

20  contract for the sale of a timeshare estate must also contain,

21  in conspicuous type, the following:  FOR THE PURPOSE OF AD

22  VALOREM TAXES OR SPECIAL ASSESSMENTS LEVIED BY TAXING

23  AUTHORITIES AGAINST A TIMESHARE ESTATE, THE MANAGING ENTITY IS

24  GENERALLY CONSIDERED THE TAXPAYER UNDER FLORIDA LAW.  YOU HAVE

25  THE RIGHT TO CHALLENGE AN ASSESSMENT BY A TAXING AUTHORITY

26  RELATING TO YOUR TIMESHARE ESTATE PURSUANT TO THE PROVISIONS

27  OF CHAPTER 194, FLORIDA STATUTES.

28         (c)  Subsequent estimates; when provided.--If the

29  closing on a contract occurs more than 12 months after the

30  filing of the offering circular with the division, the

31  developer shall provide a copy of the current estimated


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    CS for CS for SB 396                           First Engrossed



 1  operating budget of the association to the buyer at closing,

 2  which shall not be considered an amendment that modifies the

 3  offering provided any changes to the association's budget from

 4  the budget given to the buyer at the time of contract signing

 5  were the result of matters beyond the developer's control.

 6  Changes in budgets of any master association, recreation

 7  association, or club and similar budgets for entities other

 8  than the association shall likewise not be considered

 9  amendments that modify the offering. It is the intent of this

10  paragraph to clarify existing law.

11         Section 14.  Present paragraph (d) of subsection (20)

12  of section 719.504, Florida Statutes, is redesignated as

13  paragraph (f) and new paragraphs (d) and (e) are added to that

14  subsection to read:

15         719.504  Prospectus or offering circular.--Every

16  developer of a residential cooperative which contains more

17  than 20 residential units, or which is part of a group of

18  residential cooperatives which will be served by property to

19  be used in common by unit owners of more than 20 residential

20  units, shall prepare a prospectus or offering circular and

21  file it with the Division of Florida Land Sales, Condominiums,

22  and Mobile Homes prior to entering into an enforceable

23  contract of purchase and sale of any unit or lease of a unit

24  for more than 5 years and shall furnish a copy of the

25  prospectus or offering circular to each buyer.  In addition to

26  the prospectus or offering circular, each buyer shall be

27  furnished a separate page entitled "Frequently Asked Questions

28  and Answers," which must be in accordance with a format

29  approved by the division.  This page must, in readable

30  language:  inform prospective purchasers regarding their

31  voting rights and unit use restrictions, including


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    CS for CS for SB 396                           First Engrossed



 1  restrictions on the leasing of a unit; indicate whether and in

 2  what amount the unit owners or the association is obligated to

 3  pay rent or land use fees for recreational or other commonly

 4  used facilities; contain a statement identifying that amount

 5  of assessment which, pursuant to the budget, would be levied

 6  upon each unit type, exclusive of any special assessments, and

 7  which identifies the basis upon which assessments are levied,

 8  whether monthly, quarterly, or otherwise; state and identify

 9  any court cases in which the association is currently a party

10  of record in which the association may face liability in

11  excess of $100,000; and state whether membership in a

12  recreational facilities association is mandatory and, if so,

13  identify the fees currently charged per unit type.  The

14  division shall by rule require such other disclosure as in its

15  judgment will assist prospective purchasers. The prospectus or

16  offering circular may include more than one cooperative,

17  although not all such units are being offered for sale as of

18  the date of the prospectus or offering circular.  The

19  prospectus or offering circular must contain the following

20  information:

21         (20)  An estimated operating budget for the cooperative

22  and the association, and a schedule of the unit owner's

23  expenses shall be attached as an exhibit and shall contain the

24  following information:

25         (d)  The following statement in conspicuous type:  THE

26  BUDGET CONTAINED IN THIS OFFERING CIRCULAR HAS BEEN PREPARED

27  IN ACCORDANCE WITH THE COOPERATIVE ACT AND IS A GOOD FAITH

28  ESTIMATE ONLY AND REPRESENTS AN APPROXIMATION OF FUTURE

29  EXPENSES BASED ON FACTS AND CIRCUMSTANCES EXISTING AT THE TIME

30  OF ITS PREPARATION. ACTUAL COSTS OF SUCH ITEMS MAY EXCEED THE

31  


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    CS for CS for SB 396                           First Engrossed



 1  ESTIMATED COSTS. SUCH CHANGES IN COST DO NOT CONSTITUTE

 2  MATERIAL ADVERSE CHANGES IN THE OFFERING.

 3         (e)  Each budget for an association prepared by a

 4  developer consistent with this subsection shall be prepared in

 5  good faith and shall reflect accurate estimated amounts for

 6  the required items in paragraph (c) at the time of the filing

 7  of the offering circular with the division, and subsequent

 8  increased amounts of any item included in the association's

 9  estimated budget which are beyond the control of the developer

10  shall not be considered an amendment that would give rise to

11  recission rights set forth in s. 719.503(1)(a) or (b), nor

12  shall such increases modify, void, or otherwise affect any

13  guarantee of the developer contained in the offering circular

14  or any purchase contract. It is the intent of this paragraph

15  to clarify existing law.

16         Section 15.  Subsection (11) is added to section

17  720.303, Florida Statutes, to read:

18         720.303  Association powers and duties; meetings of

19  board; official records; budgets; financial reporting;

20  association funds; recalls.--

21         (11)  WINDSTORM INSURANCE.--Windstorm insurance

22  coverage for a group of no fewer than three communities

23  created and operating under chapter 718, chapter 719, this

24  chapter, or chapter 721 may be obtained and maintained for the

25  communities if the insurance coverage is sufficient to cover

26  an amount equal to the probable maximum loss for the

27  communities for a 250-year windstorm event. Such probable

28  maximum loss must be determined through the use of a competent

29  model that has been accepted by the Florida Commission on

30  Hurricane Loss Projection Methodology. Such insurance coverage

31  


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    CS for CS for SB 396                           First Engrossed



 1  is deemed adequate windstorm coverage for purposes of this

 2  chapter.

 3         Section 16.  Section 720.308, Florida Statutes, is

 4  amended to read:

 5         720.308  Assessments and charges.--For any community

 6  created after October 1, 1995, the governing documents must

 7  describe the manner in which expenses are shared and specify

 8  the member's proportional share thereof.

 9         (1)  Assessments levied pursuant to the annual budget

10  or special assessment must be in the member's proportional

11  share of expenses as described in the governing document,

12  which share may be different among classes of parcels based

13  upon the state of development thereof, levels of services

14  received by the applicable members, or other relevant factors.

15         (2)  While the developer is in control of the

16  homeowners' association, it may be excused from payment of its

17  share of the operating expenses and assessments related to its

18  parcels for any period of time for which the developer has, in

19  the declaration, obligated itself to pay any operating

20  expenses incurred that exceed the assessments receivable from

21  other members and other income of the association.

22         (3)  Assessments or contingent assessments may be

23  levied by the board of directors of the association to secure

24  the obligation of the homeowners' association for insurance

25  acquired from a self-insurance fund authorized and operating

26  pursuant to s. 624.462.

27         (4)  This section does not apply to an association, no

28  matter when created, if the association is created in a

29  community that is included in an effective

30  development-of-regional-impact development order as of October

31  


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    CS for CS for SB 396                           First Engrossed



 1  1, 1995 the effective date of this act, together with any

 2  approved modifications thereto.

 3         Section 17.  This act shall take effect upon becoming a

 4  law.

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