Category Archives: Florida Statutes

Florida Condominium Association Rules & Regulations: Drafting a Violation Policy and Issuing Fines

Posted on November 7, 2013 | 61 Comments

Every condominium association’s Declaration of Condominium and Bylaws incorporate rules and regulations that homeowners (and their tenants and guests) are obligated to follow. Further, most association Governing Documents allow for Boards of Directors to establish additional reasonable rules and regulations (through a Board vote at a properly called meeting) so long as they do not conflict with anything in the Governing Documents. The Governing Documents are often very long, a bore to read, and confusing for many homeowners. Add to that the variety of different rules the Board adopts and it is not surprising that most homeowners don’t know all the rules they are supposed to follow.

While there is no specific Florida Statute that outlines how rules and regulations adopted by the Board must be communicated, I strongly recommend that each association consider a method for routinely and thoroughly communicating the rules to homeowners and other residents. My preferred method of accomplishing this is by drafting a comprehensive Rules and Regulations document that is accompanied by a Violation Policy, outlining how violations are identified, the consequences of a violation, and the means of appealing a violation. We will go into more detail about the Violation Policy later in the post.

There are several reasons why drafting a current Rules and Regulations document with an associated Violation Policy is so important:

1.     Residents are more likely to follow rules if they know them.

2.     Residents are more likely to follow rules if there are consequences associated with violating them.

3.     For associations that are professionally managed, the Violation Policy provides a clear outline for the management company to follow when identifying violations, sending violation letters, etc. This transfers the control of rule enforcement from the manager to the Board, which is essential as management companies often fail to customize policies such as these to each property they manage.

4.     For self-managed associations, the Violation Policy provides the Board a consistent way to enforce the association’s rules, helping to avoid homeowner/ resident claims of personal bias.

The Rules and Regulations along with the Violation Policy should be (1) updated anytime a new rule is passed, (2) reviewed at least annually by the Board, (3) included on the association’s website, (4) provided to new homeowners and residents, and (4) disseminated to the homeowners and residents (via email or snail mail) at least annually but also every time a change has been made.

Components of the Violation Policy

At a minimum, the Violation Policy should include the following sections:

1. Fines Associated with Rule Violations: Often, Boards will choose to have increasing fines for multiple infractions. For example, the first violation may just be a warning, the second a $25 fine, and the third and subsequent violations a $50 fine. The fine can be determined by the number of violations of a unique rule committed by a homeowner/ resident, or by the aggregate number of total violations committed by a homeowner/ resident. It’s up to the Board. However, it is imperative that any fines issued by the Board comply with the association’s Governing Documents and the Florida Statutes. Certain Governing Documents do not allow for fines or have specific rules regarding the issuance of fines.

Florida Statute Rule Regarding Fine Amounts: According to Florida Statute 718.303(3), the Board may issue fines for violations of the association’s rule and regulations. A fine may not exceed $100 per violation; however, an additional fine up to $100 may be levied for each day a violation continues. Fines for a particular violation may not exceed $1,000 in aggregate. Florida Statute 718.303(3)(a) allows the association to suspend a resident’s common elements (i.e., amenities) use rights for a “reasonable period of time” as consequence for failing to abide by the rules and regulations.

2. Corrective Action Time Frame: If a violation requires corrective action on the part of the resident (e.g. a resident’s window shades are not an approved color so the resident will receive a fine AND must remove the shades), the Violation Policy should specify how long the resident has to correct the violation before a subsequent fine is assessed. Further, the policy should outline the action the association may take if a violation requiring corrective action continues for an extended period of time (e.g. the resident refuses to take down the shades). Florida Statute 718.303(1) allows the association to bring legal action against a homeowner or other resident for failure to comply with the rules and regulations.

3.     Violation Identification Process: How a violation must be identified and documented should be detailed. These rules should be drafted to eliminate any possibility of bias against a specific homeowner/ resident as well as “he said, she said” situations. A detailed and consistently implemented violation identification process reduces the likelihood of appeal. Sometimes the Governing Documents, often for violations relating to pets or noise, will have a process pre-established; however, in most instances this is not the case and it is up to the Board to create reasonable guidelines. Here are a few recommendations:

 a.     For visible violations (e.g., storing unapproved items on a balcony), a violation should be captured through a clear photograph of the violation for the association’s records (the ideal way), or by written confirmation that the violation exists by TWO designated persons (i.e., the property manager and the Board). I personally recommend that only the property manager or a Board member be allowed to identify visible violations. If a homeowner/ resident notices a violation, they should inform the property manager and/ or Board member(s) for verification.

b.    For noise violations (e.g., loud music, dog barking), a sound recording of the noise should be taken by a designated person (or by the complaining homeowner/ resident) for the association’s records (the ideal way). If this is not possible, written confirmation of the noise should be obtained by TWO persons (i.e., the property manager, the Board members, or residents).

4.     Non-Homeowner Residents: The policy should specify how violations are handled when they are committed by non-homeowner residents (e.g., tenants, guests). It is my recommendation that the policy clarify that all non-homeowner residents are required to abide by the rules and regulations of the Association and may be assessed fines if they fail to do so. To encourage homeowners to thoughtfully select non-homeowner residents, and to encourage homeowners to inform them of the rules and regulations, the policy should specify that homeowners are ultimately responsible for any unpaid fines incurred by their non-homeowner residents.

5.     Violation Appeal Process: The policy should outline the process homeowners must follow to request an appeal of a violation. This process should include whether or not non-homeowner residents are entitled to request an appeal or if requests must be made by homeowners.

Florida Statute Rule Regarding Fine Appeals: According to Florida Statute 718.303(3)(b), the association must provide homeowners 14 days written notice prior to imposing a fine during which time the homeowner may request an appeal. An Appeals Committee must be established for the purpose and no Board members may be on the committee. If the Appeals Committee does not agree with the proposed fine, the association may not impose it.

6.     Violation Letter Template: To ensure consistency, the Board of Directors may wish to draft a violation letter that the property manager, administrative assistant or Board member responsible for issuing violations should use to communicate all violations.

7.     Failure to Pay a Fine: The consequences for failure to pay a fine should be outlined in the policy. Per Florida Statute 718.303(3), the Association may not lien a unit if a homeowner fails to pay a fine; however, the association does have the ability to suspend a homeowner’s (and non-homeowner resident’s) common element use rights and voting rights. Further, the association may choose to use a collections agency to collect past due fines. Lastly, so long as the Governing Documents do not prohibit such action, the association may prevent the homeowner from renting their unit if past due fines have accrued.

Florida Statutes Rule Regarding the Suspension of Voting Rights and Common Elements Use Rights: Pursuant to Chapter 718.303(4) and 718.303(5), the association may suspend the voting rights and common elements use rights of any homeowner that is more than 90 days past due in any monetary obligation due to the association. These suspensions must be approved at a Board meeting and the homeowner must be notified in writing of the suspension.

Once the association has begun issuing violation letters and associated fines, the association should maintain a violation log to keep track of violations, fines, appeal status, fine due date, and date of fine payment.

I hope this information has been helpful. As always, I recommend all policies be reviewed by the association’s attorney prior to implementation.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a full-service community association management and consulting firm serving the Tampa Bay Area.

→ 61 Comments

Posted in Florida Statutes, rules & regulations

Tagged , , , , , , , , , , , , , , , , , , , , , ,

Water Leaks in Florida Condominiums: Association Responsibilities and Cost Reduction Strategies

Posted on October 28, 2013 | 202 Comments

Leaks are common in condominiums and are a constant headache for associations. Given this, you’d think there would be straightforward and consistent process for handling leaks to ensure that everyone shares the burden of repairing the water damage fairly, and in accordance with the association’s governing documents and the Florida Statutes (Chapter 718.111(11) Insurance). Unfortunately, it’s not that simple and more often than not homeowners, or the association, have to come out of pocket to repair damage caused in whole or in part by another. This blog will examine the division of responsibilities and will recommend strategies the association may use to help protect itself and its homeowners.

Rule of Thumb: When dealing with property maintenance or repair, look to the governing documents to determine who is responsible. When dealing with damage caused by a casualty, look to Florida Statute 718.111(11)(f) to determine who is responsible.

Per Florida Statute 718.111(11)(f), the association is responsible for everything except the following, for which the unit owner is responsible: all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit.

The legal and insurance community has taken the above to mean that “drywall out” is the responsibility of the Association but “drywall finishes (i.e., texture and paint) in” and “bare floor up” are the homeowner’s responsibility.

Example 1: A Toilet Leak, A Water Heater Leak, A Washing Machine Leak or A Hot Water Heater Leak

A 2nd story homeowner’s toilet has suddenly begun to leak due to a faulty wax ring, causing damage to the homeowner’s unit as well as the ceiling, walls and floors of the unit below. The association’s documents state that repair and replacement of toilets is the homeowner’s responsibility. As such, the homeowner is required to repair or replace the toilet. However, the damage resulting from the leaking toilet is considered a casualty and would fall under the Insurance Statute.

In this example, there are three parties involved: the Association, the homeowner whose toilet caused the leak, and the below homeowner.  We will assume for now that there was no negligence on the part of the homeowner with the leaking toilet (i.e., the homeowner didn’t know, or shouldn’t have known, that the toilet was leaking or going to leak). In this scenario, responsibility for damage caused by the leak would be divided as follows:

  1. The Association will repair the drywall and any damaged studs, insulation or electrical wiring within the walls.
  2. The homeowners will individually repair the personal property within their units, any damaged flooring, and the finishes on the drywall (e.g., paint, texture or wall paper).

Each party may contact their respective insurance company (condominium homeowner’s are not required to have insurance per the Florida Statutes but they may per the governing documents) to help cover the cost of the repairs.

The condominium statutes are silent regarding who is responsible for the cost of the initial dry out of the unit after water damage (i.e., removing standing water and installing proper fans). Obviously both the homeowner and the association are protecting their property by ensuring that all water is removed, no further damage is caused, and no mold issues develop. A proper dry out can be very costly and it is up to the association and homeowner to decide who will pay for this service. In my experience, it is easiest for the association to pay for the dry out as it moves the repair process along and ensures the association is meeting its fiduciary duty to protect the condominium property (failure to properly dry out a unit could cause deterioration to structural parts of the building). Another option is to split the cost with the homeowner. Further, if the homeowner has insurance, and intends to file a claim, the insurance company will often pay for the cost of the dry out.

Example 2: A Toilet Leak, A Water Heater Leak, A Washing Machine Leak or A Hot Water Heater Leak With Homeowner Negligence, Intentional Conduct or Failure to Comply with Association Rules

According to 718.111(11)(j), if damage to the condominium property is caused by homeowner negligence, intentional conduction or failure to comply with the rules of the association, the homeowner is responsible for repairing ALL portions of the damaged condominium property not covered by insurance proceeds. Further, according to 718.111(11)(g), when a homeowner is determined by the association to meet the criteria listed in paragraph (j), the association may complete the repair work to the condominium property (excluding the personal property of the homeowners) and charge the cost of the work to the homeowner. If the homeowner fails to pay, the association may collect the cost as if it were an assessment (see our blog on Collections Policies for more information). The homeowners that have sustained damage to their personal property (i.e. everything covered under Florida Statute 718.111(11)(f)) have the option to pursue legal action against the negligent homeowner.

So, in our example, let’s say that a plumber told the homeowner previously that the wax ring needed to be replaced in the toilet or a leak may occur but the homeowner chose not to make the repair. Or, let’s say that the wax ring actually began leaking because the homeowner (or homeowner’s guest) attempted to make a repair to the toilet himself and failed to properly reset the wax ring. In these case, the homeowner could be perceived as being negligent and the association may choose to complete a full dry out of the unit as well as make all repairs to the common elements (i.e. drywall out), and charge the homeowner that create the leak for the full cost. This statute gives the association a significant amount of power and the association should be careful as to how they enforce it. Negligence is often a matter of perspective and the burden of proof is on the association. As such, the association should obtain an opinion from legal counsel before deciding if they consider a homeowner negligent or not.

Enforcement Tip: Negligence is a very tricky topic. To avoid the likelihood of a legal battle, the association should build negligence into their rules and regulations whenever possible by creating a clear-cut definition of actions that are considered negligent.

As it relates to leaks due to an unexpected casualty, one such rule would be: “Homeowners MUST turn off the water to their unit if the unit is going to be vacant for more than 48 hours”. Leaving water on when there is no one in the unit that would notice a leak has been considered negligence by Florida courts in the past. Because the Board would adopt this as a rule of the association, Florida Statute 718.111(11)(j) allows the association to charge the homeowner who has not complied with this rule the full cost of repairing damage due to a water leak stemming from their unit. This is a particularly effective rule given that leaks from vacant units are frequent and tend to cause more damage than those from occupied units.

Another rule may be: “Homeowner’s (or their guests) must provide proof of liability insurance prior to completing any repairs or renovations to their units. With this rule in place, if a homeowner caused a leak themselves (which happens frequently) the association will either have the homeowner’s insurance information already and can immediately place a claim, or, if the homeowner failed to provide proof of insurance, the association may charge the homeowner the full cost of repairing the damage to the common elements caused by the leak.

 

Example 3: Professional plumber causes leak while replacing shower faucet

A 2nd story homeowner hires a plumber to replace the shower faucet. The plumber did not properly seal one of the connections, which began to leak and caused water damage to the ceiling and walls of the unit below. In this scenario, the plumber’s liability insurance would likely cover the cost to repair all damage to the property (including the homeowners’ personal property). However, if the plumber is not insured or refuses to provide his insurance information to the effected parties, the cost of repairs may end up falling to the association and the homeowner who suffered water damage, or their respective insurance companies. The association and/ or effected homeowner could choose to take legal action against the plumber and/ or the homeowner who hired the plumber but this can often be cost-prohibitive, particularly if the damage was not severe. To help reduce the burden on the association and effected homeowners, the association can choose to put specific rules in place relating to maintenance or renovation work completed by a 3rd party vendor.

Enforcement Tip: The association should consider making it a rule that homeowners MUST utilize licensed and insured vendors, and must provide to the association proof of liability insurance for any vendor working within their unit prior to work commencing. As some vendors may be less willing to provide their insurance information after they have caused a leak at a job site, this requirement protects the association and homeowners, as it will allow the association to immediately place a claim for the damage. Further, if the homeowner failed to obtain proof of insurance, Florida Statute 718.111(11)(j) allows the association to charge the homeowner who has not complied with this rule the full cost of repairing damage to the common elements.

Developing proper strategies for preventing and responding to leaks is a complicated topic and should be discussed with the association’s attorney. A “leak action plan” should be established for all representatives to follow. To avoid legal action, consistent and effective response is key. When making changes to the association’s rules and regulations that have the level of impact these “negligence” rules do, it is important that the association communicate to the membership to ensure that homeowners are properly informed of the new rules.

Feel free to reach out with any questions.

Thanks,

Emily

P.S. If you are a condominium homeowner who has recently experienced a water leak and you are looking for clarification on your rights and responsibilities, please contact us. Ryan (my husband/ co-blogger) offers legal counsel and practical advice on these issues at a reasonable hourly rate for our readers. There are no retainers required or minimum fees. Send me an email at emily@flcondoassociationadvisor.com and I will respond promptly with more information and next steps. 

→ 202 Comments

Posted in Collections, Florida Statutes, Insurance

Tagged , , , , , , , , , , , , , , , , , , ,

Your Florida Condominium Association’s Collections Policy and Procedures

Posted on August 3, 2013 | 14 Comments

One of the most important responsibilities of condominium associations is to actively collect maintenance fees from each homeowner. To avoid various legal and reputational issues, Boards of Directors must be sure that the process the association uses to collect maintenance fees is consistently applied. Many associations prefer to leave the majority of their collection efforts to their attorney; however, with a thorough collections policy in place, the Board of Directors (or the property’s manager) can easily handle the majority of the association’s collection efforts, which, in turn, can materially reduce the association’s collection-related expenses.

The association’s documents (i.e. Declaration and Bylaws), along with Florida Statutes Chapter 718, provide various collection methods for Boards to use in an effort to keep past-due maintenance fees to a minimum. These tools provide the foundation for successful collection efforts and will be discussed in detail below. We will only be focusing on past due maintenance fees in this blog post and will not be talking about fines, utility bills or any other monetary obligations of homeowners to associations.

I strongly recommend that prior to implementing a new collections policy, the Board have the association’s legal counsel review the policy. Further, I recommend the Board update and re-approve this policy annually to ensure continued compliance with Florida Statutes.

Maintenance Fees

The collections policy should specify how frequently (i.e. monthly, quarterly) and on what date (typically the first day of the month or quarter) maintenance fees are due.

Late Fees and Interest

Most associations’ declarations or bylaws outline whether or not late fees and interest can be charged to homeowners that have accrued past due maintenance fees. If your documents silent on the amount of interest that can be charged, Florida Statute 718.116(3) specifies that interest should accrue at 18% per year. Further, 718.116(3) allows for a late fee for each delinquent payment of up to the greater of $25 or 5% of the monthly/ quarterly maintenance fee.

The Board should determine when and how they will apply interest and late fees to a delinquent homeowner. More specifically, by what date each month must the homeowner have paid their monthly maintenance fee, in full, to avoid accruing a late fees and interest? Will interest begin accruing immediately upon the homeowner’s account becoming delinquent (i.e. after their first missed payment) or will the association wait unit some later date (e.g. after the account becomes 90 days past due) to begin accruing interest? The relative difficulty of properly calculating and accounting for accrued interest should be considered when making these decisions.

The Board should also determine a procedure for waiving late fees and interest in certain situations. For example, the Board may include in its policy that the late fees and interest associated with a homeowner’s first delinquent payment may be waived upon request of the homeowner but that all other late fees and interest may not be waived. Or, they may decide that late fees and interest will never be waived except as part of a settlement or payment plan approved by the Board (we will discuss this more below). Again, it is very important that these rules be applied consistently. The Board must take care not to provide special treatment to certain homeowners based on personal relationships.

Delinquency and Pre-Lien Letters

The association’s strongest weapon against maintenance fee delinquency is their right to lien and foreclose on a unit if the homeowner fails to make maintenance fee payments when due. As such, the lien and foreclosure process should be included in the collections policy.

When a homeowner fails to make a maintenance fee payment when due, the homeowner’s account becomes delinquent and most associations will send a letter to the homeowner informing them of the past due balance on their account (including all late fees and interest accrued) and the next steps the association will take in the event the homeowner fails to pay. This letter should include a copy of the homeowner’s ledger (supplied from the association’s accounting program) and a date by which the homeowner must pay all past due amounts to avoid additional fees. The collections policy should specify when these letters are sent (i.e. how many days after the homeowner’s account becomes delinquent) and through what method(s) they are communicated (e.g. email, USPS).

As required by FL Statute 718.121(4), the association must provide a notice of intent to file a lien (f.k.a. pre-lien) to the homeowner. This notice should also comply with the Fair Debt Collection Practices Act. The above mentioned delinquency letter may serve as the association’s pre-lien letter or the association may send a separate letter to the homeowner. If you would prefer to send a second letter as your pre-lien notice, the collections policy should specify when these letters are sent (generally some point in the second month of delinquency) and through what method(s) they are communicated (e.g. certified mail, return receipt requested as required by FL Statutes).

Lien Filing and Foreclosure

If delinquency and pre-lien letters failed to encourage a delinquent homeowner to cure the past due balance on their account, the association may choose to have their attorney file a lien on the unit. Filing a lien (which is only good for one year) is a prerequisite to foreclosure. If the association has chosen not to foreclose on any units, it may not be worth accruing the attorney’s fees to file a lien. The collections policy should state when the association will direct its attorney to file a lien against a unit (generally when the homeowner is more than 90 days delinquent), and what information should be provided to the attorney at that time.

Whether or not to foreclose a lien (which typically results in the association taking title to the delinquent unit) should be discussed on a case-by-case basis with the association’s attorney as there are many factors to consider including whether the unit is owner-occupied, rented or abandoned, and if there is a mortgage foreclosure case in process. Most importantly, the association should consider if they intend to rent the unit after they have taken title to it through foreclosure. While acting as a landlord can be time consuming for associations, the rental income earned often more than covers the past due fees owed by the old homeowner. The collections policy should outline the broad scenarios in which the association would foreclose on a unit.

Amenities Restrictions

Florida Statute 718.303(4) allows associations to suspend a homeowner’s (and their tenants’ and guests’) right to use the common elements of the property if the homeowner is more than 90 days delinquent in paying their maintenance fees. When possible, associations should use this to their advantage by restricting the homeowner’s access to the property’s pool, gym, clubhouse, car wash, laundry facilities or any other amenities the property offers. For occupied units (and particularly for rented units where the tenant is restricted from using the amenities), this inconvenience can often be enough to encourage homeowners to pay their past due balance. The collections policy should specify which amenities would be restricted as well as how and when they would be restricted. According to FL Statute 718.303(6), the Board must vote to suspend a homeowner’s right to use the common elements at a Board meeting and must notify the homeowner of the amenities restriction via mail or hand delivery.

Lease Restrictions and Rent Garnishment

If a property’s declaration or bylaws allows the Board to approve or deny a proposed lease of a unit, FL Statute 718.116(4) allows Boards to deny a proposed lease of a unit due to a homeowner being delinquent in the payment of maintenance fees. Preventing homeowners from leasing their units is a very important tool for associations and, if allowed by the property’s documents, should be included the collections policy. The policy should specify when a homeowner becomes ineligible to lease their unit, how they are informed of their inability to lease their unit, and what will happen if a unit is leased by a homeowner that is ineligible to lease their unit.

Rent garnishment is the association’s primary weapon against homeowners with past due maintenance fees that are renting their units. Florida Statute 718.116(11)a allows the association to demand that the tenant make lease payments directly to the association until all past due maintenance fees have been paid. Further, if the tenant refuses to make payments to the association, the association may sue for eviction of the tenant. The collections policy should specify when the association will attempt to rent garnish and the process for doing so (the FL Statutes provide specific details on how the tenant and homeowner must be informed). Further, the collections policy should specify when the association would begin eviction proceedings should the tenant fail to make lease payments to the association.

The leasing section of the collections policy should be reinforced by a separate and distinct Leasing Policy (to be discussed is a separate blog post).

Voting Rights

Florida Statute 718.303(5) allows associations to suspend a homeowner’s voting rights if the homeowner is more than 90 days delinquent in paying their maintenance fees. This particular restriction does not tend to do much to encourage homeowners to pay past due balances as those with past due balances tend not to care enough to vote. However, it is worthwhile for the association to include suspending homeowners’ voting rights in their collections policy as the association may reduce the total number of votes necessary to constitute a quorum of the membership by the number of voting rights suspended. This can be a difference maker if the association is struggling to obtain enough votes for their annual meeting, for amendments to the association’s documents, or for any other vote. Similarly to the common elements restriction, according to FL Statute 718.303(6), the Board must vote to restrict voting rights at a Board meeting and must notify the homeowner of the voting restriction via mail or hand delivery.

Payment Plans

If a homeowner has accrued past due maintenance fees and would like to avoid having the association foreclose on their unit, they may wish to establish a payment plan with the association. While each payment plan approved by the Board may be customized for each homeowner, the collections policy should establish the basic guidelines for when the Board may consider a payment plan, how the homeowner should request a payment plan, how a payment plan is approved, who (the association or its attorney) will receive the payment plan installments, whether or not late fees and interest continue to accrue during the implementation of the payment plan, and what will happen if the homeowner fails to abide by the payment plan (typically foreclosure). The collections policy may also want to specify that the Board will not accept any payment plans that reduce the total amount owed by the homeowner.

 Settlements

A homeowner with past due maintenance fees may wish to come to a settlement with the association where by they would negotiate with the association some reduction in the amount owed. This typically occurs when the homeowner is looking to sell their unit. The Board will typically negotiate settlements on a case-by-case basis but some basic guidelines can be included in the collections policy including when the Board may consider a settlement, how the homeowner should request a settlement and how a settlement is approved. As I have mentioned before, consistency is key. Whatever the logic the Board choses to use in determining if a settlement is acceptable, they should be sure to apply that same logic to all homeowners and not allow personal feelings enter into the decision making process.

Repayment Order

The collections policy should specify how payments are applied to a homeowner’s past due balance. More specifically, Florida Statute 718.116(3) specifies that payments should first be applied to interest, then to late fees, then to attorney’s fees and costs associated with collection, and then to the delinquent maintenance fees.

Verbal Communications

The collections policy may want to specify the situations in which a member of the Board or the association’s manager will actively reach out (via phone or email) to a homeowner with past due maintenance fees in an attempt to encourage the homeowner to pay. An appropriate time to do this may be prior to the Board voting to lien and foreclose on the property as there is no point in accruing additional legal fees if the homeowner is planning to make payment in full in the coming days or weeks. Further, it may be wise for a representative of the association to offer the homeowner a payment plan, as the homeowner may not have realized this was an option. In my experience, actively communicating with homeowners makes collection efforts more successful.

This post addressed all of the key components of a quality collections policy. If your Board does not have a collections policy, I strongly recommend this be an agenda item at an upcoming Board meeting. If you have any questions or would like our assistance in drafting a collections policy for your property, feel free to reach out to us.

Ryan

Ryan is a Florida condo owner and a director of VERA Property Management, a condominium and homeowners’ association management and consulting firm. VERA will gladly draft a Collections Policy (including delinquency letters, pre-lien letters, rent demand letters and all other relevant notices) for your Association based on the desires of the Board, your association’s declaration and bylaws, as well as the Florida Statutes.  Please contact us today for a quote!

→ 14 Comments

Posted in Collections, Florida Statutes

Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

Posted on June 27, 2013 | 46 Comments

As promised in the discussion of condominium associations’ Official Records, we have dedicated a post exclusively to the accounting records that are required to be maintained pursuant to Florida Statute 718.111(12)(a)(11).

 All accounting records of a condominium association must be maintained for at least 7 years. To be prudent, an association may decide to keep all association records since developer turnover. If your property does not have a lot of storage space for hard copy records, there are many companies that specialize in scanning records electronically and/or storing hard copy records. These services are relatively inexpensive and serve to both reduce clutter and protect the association’s records from fire, theft, or natural disaster.

Most professional management companies use high-end accounting software to maintain the bulk of their associations’ accounting records. This software can cost thousands of dollars so purchasing software like this doesn’t make much sense for the self-managed condominium. For very small condominiums, a program such as excel can be used to maintain the association’s financial statements, including homeowner ledgers. However, for larger condominiums, accounting software such as QuickBooks, which costs in the $300 range, likely makes the most sense. As I have mentioned in previous posts, if the Board of Directors does not have a member with a strong accounting background, hiring a 3rd party accountant to maintain the association’s books may be necessary.

Here’s what the FL Statutes say condo associations must maintain:

1.    Accurate, itemized, and detailed records of all receipts and expenditures.

If this seems very broad to you, that’s because it is. The FL Statutes leave it to each condominium to determine exactly what they need to keep, and in what format, in order to meet this requirement. As part of the association’s routine bookkeeping, all monies received and spent will be entered into the association’s accounting software. Generally, these programs allow the user to enter a description of each deposit or expense. Be sure to enter detailed descriptions for each entry including the parties involved and the reason that the funds were received or paid. You’ll thank yourself for doing this the first time you try to look back at specific transactions from previous years. Further, I strongly recommend you keep all of the following either electronically or in hard copy:

  • Copies of all checks received and written by the association
  • Copies of all monthly bank statements for all association bank accounts
  • Copies of all “lockbox” payment detail if this service is used by the association
  • Copies of all final invoices paid by the association (typically these invoices are kept with the copy of the check that paid the invoice)
  • Copies of all reconciliation reports (showing that the bank statements and the association’s bookkeeping reconcile each month-end)

2.    A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid on the account, and the balance due.

This refers to the balances owed by each homeowner for their maintenance fees. This information should already be maintained in the association’s accounting system and there is nothing else special that needs to be done. These balances should include any accrued late fees or interest. I recommend you keep any other amounts owed to the association (e.g. fines, charges backs for work completed by the association on behalf of the homeowner) on a separate ledger for each homeowner as the association may only lien and foreclose on a unit for past due maintenance fees (and associated late fees/ interest). This makes it easier for the association to provide accurate account balances to the association’s attorney (during collection efforts) or prospective buyers. Along with this requirement, I recommend that the association maintain monthly A/R aging summaries (showing those units that are 30, 60 or 90 days past due).

3.    All audits, reviews, accounting statements, and financial reports of the association or condominium.

What an association must maintain specifically under this requirement depends in large part on the size of the association. According to Florida Statute 718.111(13), each association must produce a year-end financial report (or have contracted for the production of this report) within 90 days of fiscal year-end. The type of report required is as follows:

  • An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare GAAP compiled financial statements.
  • An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare GAAP reviewed financial statements.
  • An association with total annual revenues of $400,000 or more shall prepare GAAP audited financial statements.

Details on how to prepare the above financial report are provided in Rule 61B-22.006 of the Florida Administrative Code. The Florida Statutes allows the voting interests of the association to approve a waiver of compiled, reviewed or audited financial statements for up to three consecutive years.

Along with the above described report, I recommend that the association maintain copies of balance sheets and income statements for each month-end that have been approved by the Board.

4.    All contracts for work to be performed. Bids for work to be performed are also considered official records and must be maintained by the association.

This requirement is relatively self-explanatory; however, there are some simple ways to keep track of all of this information in an organized fashion. I recommend that all long term contracts approved by the association be kept together for reference. It may be helpful to keep a list of all contracts including their maturity dates and renewal/ termination provisions. As mentioned above, all other contracts/ invoices can easily be kept along with a copy of the check that was issued by the association to pay the contract/ invoice. Lastly, all bids that were received for work must be kept as well. I recommend keeping these separate from those bids that were actually approved to avoid confusion.

As was mentioned in a previous post, it is a smart idea to keep a copy of each packet that is provided to the Board at each meeting. These packets typically include all bids related to agenda items so maintaining the packets would comply with the above contracts requirement. These packets also typically include recent financial statements, minutes from the previous meeting, the meeting agenda, and more of the items that are considered part of the official records of the association.

I am available via email if you have any questions or comments.

Ryan

 

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 46 Comments

Posted in Financial, Florida Statutes

Tagged , , , , , , , , , , , , , , , , , ,

Save Time and Money using Email to Communicate with Homeowners

Posted on June 26, 2013 | 9 Comments

For all condominium associations, but especially for self-managed condominiums, any means to save time is essential. If a change in process means you are able to save money too, then it’s a no-brainer. Taking advantage of the Florida Condominium Statutes’ electronic transmission policy does exactly this. In today’s post I am going to outline when associations are allowed to communicate information with residents electronically (i.e. via email) and ways the association can take advantage of this method to save time and money.

Chapter 718 of the Florida Statutes outlines all of the required written communications condominium associations must provide to residents (e.g. annual budget drafts, year-end financial statements, Board election information). In the past, these communications were typically delivered to residents via “snail mail” and, depending on the size of the community, associations were spending hundreds or thousands of dollars per year on paper, printing, envelope and postage costs, not to mention the countless hours of envelope stuffing and label posting involved. Using email can eliminate all of these burdens; however, there is one important step the association must take before shifting to electronic communication.

All association electronic communications must comply with Rule 61b-23.0029 of the Florida Administrative Code. As detailed in the rule, prior to providing communications via email to a homeowner, the homeowner must consent in writing to receive communications electronically. In this day and age, it usually isn’t difficult to encourage residents to agree to receive communications electronically as most prefer this method. The association is required to keep all consents as part of the official records. A simple form with the following language should suffice:

I agree to receive all communications from the Board of Directors of <Name of Condominium Association>, either directly or on behalf of the Association by the current Property Manager, in electronic format utilizing the email address provided below. Communications that are required to be provided in hard copy by Florida Statute will continue to be hand-delivered or sent by mail. 

For those homeowners that have consented to receive communications electronically, the following communications can be sent via email according to the Florida Statutes (718.112):

  1. Notice of any meeting where nonemergency special assessments will be considered
  2. Notice of the Annual Meeting
  3. First and Second Notices of a Board Election
  4. Proposed Annual Budget

Two notable times where the Florida Statutes do not specifically allow email communication are:

  1. Notice for a special budget meeting when the proposed budget is greater than 115% of the previous year’s budget
  2. Year-End Financial Reporting

There is one more important thing to note about electronic communication. Per the Florida Administrative Code, it is the association’s responsibility to shift from electronic communication to traditional mailing if attempts to send a communication via email to a homeowner have failed two consecutive times.

If you haven’t done so in your community already, consider taking advantage of email! Your budget and the environment will thank you.

Emily

emily@flcondoassociationadvisor.com

 

→ 9 Comments

Posted in Florida Statutes

Tagged , , , , , , , , ,

Florida Statute Review: 718.111(12) Official Records

Posted on June 21, 2013 | 37 Comments

The Florida condominium statutes are very specific about what records an association must keep and for how long. For a self-managed condominium, one Board member (typically the Secretary) should be responsible for ensuring that the association’s records comply with 718.111(12) at all times. I will provide a brief review of the requirements of this statute here as well as some helpful tips to maintaining your association’s records.

What are the key items you are required to keep?

  1. All plans, permits, warranties and other items the developer provided to the association upon turnover.
  2. The Declaration of Condominium and any approved amendments.
  3. The Bylaws and any approved amendments.
  4. The Articles of Incorporation and any approved amendments.
  5. The current Rules & Regulations (old versions do not need to be maintained)
  6. Meeting minutes of all association meetings for the last seven years.
  7. Any audio or video recordings of association meetings (at least until the minutes from the meeting has been approved)
  8. A current roster of all homeowners’ unit numbers, mailing addresses and telephone numbers.
  9. A current roster of all homeowners’ email addresses and fax numbers if the owner has consented to receive notice by electronic transmission. This information is not available to other homeowners unless the homeowner has consented to receive notices by electronic transmission.
  10. Current insurance policies (old policies do not need to be maintained)
  11. Every contract to which the association is or was a party (including management, janitorial and landscaping contracts, to name a few) over the last seven years.
  12. All accounting records of the association for the last seven years. Details surrounding accounting record retention will be discussed in a separate post.
  13. Ballots, sign-in sheets, voting proxies and any other documents related to a homeowner vote for one year from the date of the vote.
  14. A copy of the current question and answer sheet referenced in FL Statute 718.504. As sample of this sheet is available from the Florida Department of Business Regulation (Form CO 6000-4).
  15. All other pertinent records of the association.

The association’s official records must be available for homeowner viewing. Homeowners have the right to view and photocopy all of the association’s official records with the exception of (1) documents protected by lawyer-client privilege; (2) information associated with the sale of a unit; (3) homeowner medical records and other confidential information such as Social Security Numbers; (4) association security information; and (5) personnel records (if the association has employees). If the homeowner requests a hard copy of a specific record, the Association may charge the homeowner its actual costs to prepare those records for the homeowner. It is very important that the association comply with requests from homeowners to view association records as failure to do so can lead to monetary damages.

I strongly recommend that self-managed associations follow these guidelines to ensure that the association’s records are protected and also easily accessible for viewing by homeowners. Official record transparency is a great way to keep homeowners confident in the Board’s ability to successfully manage the association.

  1. Keep hard copies of the Declaration of Condominium, Bylaws, Rules & Regulations, meeting minutes, and budget with maintenance fee schedule available for homeowners and prospective buyers at all times. Establish a reasonable fee schedule for these items ahead of time based on production costs and ensure these fees are enforced consistently.
  2. If the association has a website, keep all of the association’s records on the website for homeowners to access at their convenience. Not only does this provide complete transparency but it also provides a web-based backup of the official records so there is no concern about them being destroyed due to theft or natural disaster.
  3. Keep binders with hard copies of all of the association’s records on property. A simple way to do this is to have binders for each key item (e.g. meeting minutes, contracts, historical budgets, etc.).
  4. Keep a binder with all Board member meeting packets (the information provided to each Board member prior to a meeting). All of this information is considered official records of the association, and it is a great way to look back at exactly what the Board discussed in past meetings.
  5. Keep electronic copies of all association records on one designated association computer and backup all of these records routinely onto an external hard drive maintained by one of the Board members.

Two other items that I think are worth keeping in both hard and soft copy include:

  1. Any opinions provided by the association’s attorney. Often these are kept in the email of the Board member that asked the question and, therefore, when new Board members join, they waist association resources by asking the same questions again.
  2. Any email communications where a quorum of Board members discuss or take a vote on an association issue. Email communication between a quorum of Board members should be limited as much as possible as these email chains technically constitute a Board meeting which must be open to homeowners. However, in certain circumstances this cannot be avoided so my advice would be to use email to communicate to a quorum of the Board as little as possible and to keep copies of those communications for homeowner review.

I hope this overview of the official records statute has been helpful. As always, feel free to comment or reach out to me via email if you would like to discuss this topic or any other.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 37 Comments

Posted in Florida Statutes

Tagged , , , , , , , , , , , , , , ,