Rob Samouce: New laws to affect homeowners' associations beginning Oct. 1

Gov. Jeb Bush signed into law Senate Bill 2984 on June 23. It is a 77-page bill containing some major changes to the laws affecting homeowners' associations and condominium associations. In the last two months, we discussed some of these new laws which went into effect June 23 for homeowners' associations and that will commence Oct. 1 for condominium associations. We will now look at the new homeowners' association laws that will go into effect Oct. 1.

Small associations: For some unknown reason, homeowners' associations with fewer than 15 units have been singled out for special selective enforcement treatment. For these small associations, the associations can only enforce covenant restrictions against an owner that were in effect before the owner purchased the home. It appears the owners could amend their covenants to add new restrictions to new purchasers. However, such new restrictions would be unenforceable against pre-existing owners who do not approve of the new restrictions. This special treatment does not apply to most homeowner's associations as most associations have more than 15 units.

Board meetings: If 20 percent of the total voting interests petition the board to address an item of business, the board must within 60 days, either at its next regular board meeting or at a special board meeting, take the petition item up on the agenda. The board must then give all members 14-day notice of the board meeting and any member shall have the right to speak for at least three minutes on the petition agenda item(s) provided that the member signs the sign-up sheet, if one is provided, or submits a written request to speak prior to the meeting.

Although the board must allow members to speak on the petition agenda item(s), it is not obligated to take any other action requested by the petition and there is no requirement to having to allow members to speak on non-petition agenda items.

The association may adopt written reasonable rules "expanding" the right of members to speak at board meetings and govern the frequency, duration and other manner of member statements.

Confidential "personnel" board meetings: Irrespective of open board meetings under the sunshine laws, board or committee meetings "with the association's attorney", for the purpose of discussing personnel matters, do not need to be open to the members.

Board meeting notices: Any board meeting at which special assessments will be considered or at which rules that regulate the use of parcels in the community may be adopted, amended or revoked must be mailed, delivered or electronically transmitted to the members and posted conspicuously on the property or broadcast on closed-circuit cable television, at least 14 days before the meeting. If changes to the rules regulating parcel use will be considered, the notice must include a statement that "changes to the rules regarding the use of parcels will be considered."

Official association records expanded: The list of official records that must be kept and available to the members for review and copying have been vastly expanded to include the disclosure summary that owners must provided to prospective purchasers and "all other written records of the association not specifically included in the foregoing which are related to the operation of the association." This pretty much includes all association related records now except for the following specified exceptions.

Official records not accessible to the members: Association records protected by the lawyer-client privilege and the work-product privilege are inaccessible to members until the conclusion of litigation or adversarial administrative proceedings. This includes records prepared by the attorney or at the attorney's express direction which reflects a mental impression, conclusion, litigation strategy or legal theory of the attorney or the association and was prepared exclusively for civil or criminal litigation or adversarial administrative proceedings or in anticipation of imminent litigation or adversarial proceedings. Also inaccessible to members is information obtained by the association in connection with the approval of lease or sales transfers, disciplinary, health, insurance and personnel records of the association's employees and medical records of parcel owners or community residents.

Member access to records: An association can adopt reasonable written rules governing the frequency, time, location, notice, records to be inspected and manner of inspection, but may not require an owner to provide a proper purpose for the inspection, state any reason for the inspection, or limit the right to inspect to less than one eight-hour business day per month. The association can charge up to 50 cents per page for copies made on the association's copier. If the association does not have a copier where the copies are kept or if the records requested to be copied are more than 25 pages, the association can have the copies made by an outside vendor and charge the actual cost of the copying to the member.

Financial reporting: The annual financial reporting requirements for homeowners' associations will now be very similar to those currently required in condominiums. For homeowners' associations with total annual revenues of less than $100,000 or less than 50 parcels, a report of cash receipts and expenditures is required. For total revenues of $100,000 or more, but less than $200,000, compiled financial statements are called for. For total revenues of $200,000 or more, but less than $400,000, reviewed financial statements are necessary. For total revenues of $400,000 or more, audited financial statements are required. A laundry list of items that must be shown in a report of case receipts and expenditures is provided.

Reduction or increase of financial reporting requirements: If a majority of the owners vote for the association to do so, one of the lesser intensive and costly annual financial report can be prepared in lieu of compiled, reviewed, or audited financial statements. However, if 20 percent of the parcel owners petition the board for level of financial reporting higher than required, then the board must hold a members meeting within 30 days to vote on the petition. If a majority of the members vote for the higher level, the higher level report must be prepared and if necessary the budget must be amended or a special assessment levied to pay for the more costly financial report.

Recall: Members will now be given the right to recall directors, but only by written agreement or "ballot" unless the bylaws provide for member meeting recall. The process is essentially the same as provided for condominium associations. A majority vote of the members is required for the recall to be effective. If the recall is disputed by the board, binding arbitration with the division (Department of Business and Professional Regulations; Division of Florida Land Sales, Condominiums and Mobile Homes) is provided the same as for condominiums.

There are a handful of other changes to the laws affecting homeowners' associations. However, most of them are "niche" laws that only come up in very limited circumstances, such as the prohibition of developers using association funds to defend association litigation against developers and prohibition of SLAPP suits, and are therefore of no concern to most homeowners' associations. Due to the large number of new procedural laws affecting how homeowners' associations must conduct their business, many associations may wish to review and update their bylaws, with legal counsel, to incorporate the procedural changes into their bylaws so that the directors will feel comfortable in the future that they are conducting their association business in legal compliance with the new laws.

Rob Samouce, a principal in the Naples law firm of Samouce, Murrell, & Gal, P.A. concentrates his practice in the areas of community associations including condominium, cooperative and homeowners' associations, real estate transactions, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

© 2004 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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