Florida Legislature Rewrites Laws for Condo Community Associations
By: Melissa A. Santalone
Florida House Bill 1237, a bill which proposed significant changes to several laws governing condominium community associations, passed both houses of the Florida Legislature in the 2017 legislative session and is expected to go into effect as of July 1, 2017. The bill, written in response to public outcry over corruption and criminal activity in condo communities in South Florida, revised aspects of the Florida Statutes to prohibit certain conflicts of interest for condo boards and board members; apply criminal penalties for certain actions by board members; and impose new requirements for financial statements, recordkeeping, and elections, among other things. Here are just some of the key changes pertaining to conflicts of interest and newly criminalized activities:
Conflicts of Interest
- An association is prohibited from hiring an attorney who also represents the management company for the association.
- A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title in lieu of foreclosure.
- An association, unless it is a timeshare condo association, may not employ or contract with any service provider that is owned or operated by a board member or officer, or any person who has a financial relationship with a board member or officer, or certain relatives of board members or officers, unless the board member or officer owns less than 1 percent of the equity shares.
- If, after transfer of control to the association, 50% or more of the units in the community are owned by a party contracting to provide maintenance or management services to an association or by a board member or officer of such a party, the contract may be cancelled by majority vote of the unit owners other than the contracting party or the officer or board member of the contracting party.
- Certain disclosures must be made by any officer or director proposing to engage in activity that is a conflict of interest. If the board votes against taking the action, the officer or director must notify the board in writing of his or her intention not to take the action or to withdraw from office. If the board finds an officer or director violated this provision, the officer or director shall be deemed removed from office.
- A rebuttable presumption of a conflict of interest exists if, without prior notice, (1) a director or officer of an association or certain of their relatives enters into a contract for goods or services with the association or (2) a director or officer or certain of their relatives holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.
Newly Criminalized Activity
- Officers, directors, and managers are prohibited from soliciting, offering to accept, or accepting any kickback for his or her own benefit or that of his or her immediate family, and violation of this provision is considered a violation of the criminal law. A violation of this provision may also subject an officer, director, or manager to civil penalties.
- Forgery of a ballot envelope of voting certificate used in an election is a felony of the third degree and punishable by up to 5 years in prison.
- The theft or embezzlement of funds of a condo association is considered a theft and punishable pursuant to Fla. Stat. § 812.014.
- The destruction of or refusal to allow inspection or copying of an official record of a condo association in furtherance of a crime is punishable as tampering with physical evidence or as obstruction of justice.
- An officer of director charged by information or indictment with a crime referenced above must be removed from office until the end of his or her period of suspension or the end of his or her term, whichever occurs first.
- If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or director of any association and may not have access to the official records of any association, except pursuant to court order.
- If the charges against the officer or director is resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term in office, if any.
These changes to the laws governing condo community associations will serve to complicate board and board member compliance with the new provisions. For guidance on these changes to condo association law or any aspect of Florida law governing community associations, please contact the attorneys in FMG’s Tampa office.