July 23, 2010

Changes to Chapter 718, the Florida Condominium Act, in SB 1196

Holland & Knight Alert
Melissa S. Turra

In addition to including the highly anticipated Distressed Condominium Relief Act, Senate Bill 1196 – which was executed by Governor Charlie Crist on June 1, 2010, and took effect on July 1 2010 – also provides a significant overhaul of the Florida Condominium Act in Chapter 718, Florida Statutes. The following is a summary of the most significant changes.

Section 718.116(1) (b) (1) – First Mortgagee’s Liability for Delinquent Assessments

The revised language provides that the liability of a first mortgagee (or its successors and assigns) who acquires title by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title is limited to the lesser of:

  1. The unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
  2. One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee.

The change in law increases the period of potential liability for delinquent assessments from six to 12 months.

Section 718.110(13) – Unit Rentals

The revised language provides more detail as to what is prohibited with respect to amending the restrictions regarding rental of a unit: “An amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment.”

Section 718.112(2)(d) – Board of Directors

This Section now provides that co-owners of a unit may serve as members of the board of directors at the same time if they own more than one unit or if there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.

A few years ago, the legislature introduced a requirement that each unit owner who desired to be a candidate for the board of directors complete a certification form attesting that he or she had read and understood the governing documents of the association and Chapter 718 prior to the election. The revised language now requires only that a similar certification, or certificate of completion of the educational curriculum by a condominium education provider that has been approved by the Division of Condominiums, Timeshares and Mobile Homes, be provided within 90 days after being elected or appointed to the board. If the newly-elected board member fails to timely file this certification, they will be suspended until such certification is provided.

Section 718.112(2)(n) – Board of Director Delinquencies

This Section now provides that a director or officer who is more than 90 days delinquent in the payment of any monetary obligation due to the association (rather than just delinquent in the payment of regular assessments as the previous law provided) shall be deemed to have abandoned the office.

Section 718.116(11) – Tenants to Pay Rent to Association

A new Section has been added which states that if a unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may demand in writing that the tenant pay all future rents and other monetary obligations related to the unit directly to the association. The association must provide written notice to the unit owner of the association’s demand on the tenant. The tenant must comply with such demand until the association releases the tenant or the tenant ceases to occupy the unit. If the tenant fails to direct the required payment to the association, the association has the power to issue notices under Section 83.56 and may sue for eviction under Chapter 83 as if the association were a landlord under Part II of Chapter 83.1

Section 718.202(11) – Escrow Accounts

In Double AA International Investment Group, Inc. and Daymi Rodriguez v. Swire Pacific Holdings, Inc. and Lawyers Title Insurance Corporation,2 the court held that a purchaser of a condominium unit may rescind its contract due to the developer’s failure to hold deposits in excess of 10 percent of the purchase price in a separate escrow account from the escrow account in which the initial 10 percent deposit was held, as required by Section 718.202. In response, the legislature quickly added a provision to SB 1196 in order to counteract the potential landslide in purchaser litigation that this case could have created. The new provision reads as follows:

All funds deposited into escrow pursuant to subsection (1) or subsection (2) may be held in one or more escrow accounts by the escrow agent. If only one escrow account is used, the escrow agent must maintain separate accounting records for each purchaser and for amounts separately covered under subsections (1) and (2) and, if applicable, released to the developer pursuant to subsection (3). Separate accounting by the escrow agent of the escrow funds constitutes compliance with this section even if the funds are held by the escrow agent in a single escrow account. It is the intent of this subsection to clarify existing law.

Section 718.301(1)(f) – Transfer of Association Control

The Legislature added a caveat to the turnover trigger of a receiver for the developer being appointed. The revised provision states that turnover of control of the association must occur “when a receiver for the developer is appointed by a circuit court and is not discharged within 30 days after such appointment, unless the court determines within 30 days after appointment of the receiver that transfer of control would be detrimental to the association or its members …”

Section 718.303(3) – Suspension of Rights for Delinquent Unit Owners

A new provision has been added to allow an association to suspend the right of a unit owner, or a unit owner’s occupant, to use common elements or any other association property if a unit owner is delinquent in paying any monetary obligation due to the association for more than 90 days. The association cannot suspend the rights of the unit owner or its occupants to use limited common elements, common elements that must be used to access the unit, utility services provided to the unit, parking spaces or elevators. The association must provide at least 14 days’ written notice of such suspension and an opportunity for a hearing, but such notice and opportunity for a hearing may occur after the suspension is imposed at a duly called board meeting. The association may also suspend the voting rights of a member due to nonpayment of any monetary obligation owed to the association for more than 90 days. The suspension ends when the unit owner comes current with the association for all monetary obligations currently due or overdue to the association.

1 The Association is not otherwise considered a landlord under Chapter 83 and specifically has no duties under Section 83.51.

2010 WL 1258086 (S.D.Fla. Mar. 30, 2010).

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