Florida Senate - 2023                          SENATOR AMENDMENT
       Bill No. CS for CS for SB 154
       
       
       
       
       
       
                                Ì504794GÎ504794                         
       
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
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                  Floor: WD            .                                
             04/10/2023 03:42 PM       .                                
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       Senator Pizzo moved the following:
       
    1         Senate Substitute for Amendment (315026) (with directory
    2  and title amendments)
    3  
    4         Delete lines 518 - 710
    5  and insert:
    6         (16) INVESTMENT OF ASSOCIATION FUNDS.—
    7         (a)A board, in fulfilling its duty to manage operating and
    8  reserve funds of an association, must use best efforts to make
    9  prudent investment decisions that carefully consider risk and
   10  return in an effort to maximize returns on invested funds.
   11         (b)An association, including a multicondominium
   12  association, may invest reserve funds in one or any combination
   13  of depository accounts at a community bank, savings bank,
   14  commercial bank, savings and loan association, or credit union
   15  if the respective account balance at any institution does not
   16  exceed the amount of deposit insurance per account provided by
   17  any agency of the Federal Government or as otherwise available.
   18  Notwithstanding any declaration, only funds identified as
   19  reserve funds may be invested pursuant to this subsection.
   20         (c)The board shall create an investment committee composed
   21  of at least two board members and two unit owners. The board
   22  shall also adopt rules for invested funds, including, but not
   23  limited to, rules requiring periodic reviews of any investment
   24  manager’s performance, the development of an investment policy
   25  statement, and that all meetings of the investment committee be
   26  recorded and made part of the official records of the
   27  association. The investment policy statement developed pursuant
   28  to this paragraph must, at a minimum, address risk, liquidity,
   29  and benchmark measurements; authorized classes of investments;
   30  authorized investment mixes; limitations on authority relating
   31  to investment transactions; requirements for cash or cash
   32  equivalents for projected reserve expenditures within, at
   33  minimum, the next 24 months; projected expenditures relating to
   34  an inspection performed pursuant to s. 553.899; and proxy
   35  response protocols.
   36         (d)The investment committee shall recommend investment
   37  advisers to the board, and the board shall select one of the
   38  recommended investment advisers to provide services to the
   39  association. Such investment advisers must be registered or have
   40  notice filed under s. 517.12. The investment adviser and any
   41  representative or association of the investment adviser may not
   42  be related by affinity or consanguinity to, or under common
   43  ownership with, any board member, community management company,
   44  reserve study provider, or unit owner. The investment adviser
   45  shall comply with the prudent investor rule in s. 518.11. The
   46  investment adviser shall act as a fiduciary to the association
   47  in compliance with the standards set forth in the Employee
   48  Retirement Income Security Act of 1974 at 29 U.S.C. s.
   49  1104(a)(1)(A)-(C). In case of conflict with other provisions of
   50  law authorizing investments, the investment and fiduciary
   51  standards set forth in this paragraph must prevail. If at any
   52  time the investment committee determines that an investment
   53  adviser does not meet the requirements of this section, the
   54  investment committee must recommend a replacement investment
   55  adviser to the board.
   56         (e)At least once each calendar year, or sooner if a
   57  substantial financial obligation of the association becomes
   58  known to the board, the association must provide the investment
   59  adviser with the association’s investment policy statement, the
   60  most recent reserve study report, the association’s structural
   61  integrity report, and the financial reports prepared pursuant to
   62  subsection (13). If there is no recent reserve study report, the
   63  association must provide the investment adviser with a good
   64  faith estimate disclosing the annual amount of reserve funds
   65  necessary for the association to fully fund reserves for the
   66  life of each reserve component and each component’s
   67  redundancies. The investment adviser shall annually review these
   68  documents and provide the association with a portfolio
   69  allocation model that is suitably structured and prudently
   70  designed to match projected annual reserve fund requirements and
   71  liability, assets, and liquidity requirements. The investment
   72  adviser shall prepare a funding projection for each reserve
   73  component, including any of the component’s redundancies. There
   74  must be a minimum of 36 months of projected reserves in cash or
   75  cash equivalents available to the association at all times.
   76         (f)Portfolios managed by the investment adviser may
   77  contain any type of investment necessary to meet the objectives
   78  in the investment policy statement; however, portfolios may not
   79  contain stocks, securities, or other obligations that the State
   80  Board of Administration is prohibited from investing in under
   81  ss. 215.471, 215.4725, and 215.473 or that state agencies are
   82  prohibited from investing in under s. 215.472, as determined by
   83  the investment adviser. Any funds invested by the investment
   84  adviser must be held in third-party custodial accounts that are
   85  subject to insurance coverage by the Securities Investor
   86  Protection Corporation in an amount equal to or greater than the
   87  invested amount. The investment adviser may withdraw investment
   88  fees, expenses, and commissions from invested funds.
   89         (g)The investment adviser shall:
   90         1.Annually provide the association with a written
   91  certification of compliance with this section and a list of
   92  stocks, securities, and other obligations that are prohibited
   93  from being in association portfolios under paragraph (f); and
   94         2.Submit monthly, quarterly, and annual reports to the
   95  association which are prepared in accordance with established
   96  financial industry standards and in accordance with chapter 517.
   97         (h)Any principal, earnings, or interest managed under this
   98  subsection must be available at no cost or charge to the
   99  association within 15 business days after delivery of the
  100  association’s written or electronic request.
  101         (i)Unallocated income earned on reserve fund investments
  102  may only be spent on capital expenditures, deferred maintenance,
  103  structural repairs, or other items for which the reserve
  104  accounts have been established. Any surplus of funds which
  105  exceeds the amount required to maintain fully funded reserves
  106  must be managed pursuant to s. 718.115.
  107         Section 6. Paragraphs (f), (g), and (h) of subsection (2)
  108  of section 718.112, Florida Statutes, are amended to read:
  109         718.112 Bylaws.—
  110         (2) REQUIRED PROVISIONS.—The bylaws shall provide for the
  111  following and, if they do not do so, shall be deemed to include
  112  the following:
  113         (f) Annual budget.—
  114         1. The proposed annual budget of estimated revenues and
  115  expenses must be detailed and must show the amounts budgeted by
  116  accounts and expense classifications, including, at a minimum,
  117  any applicable expenses listed in s. 718.504(21). The board
  118  shall adopt the annual budget at least 14 days before the start
  119  of the association’s fiscal year. In the event that the board
  120  fails to timely adopt the annual budget a second time, it is
  121  deemed a minor violation and the prior year’s budget shall
  122  continue in effect until a new budget is adopted. A
  123  multicondominium association must adopt a separate budget of
  124  common expenses for each condominium the association operates
  125  and must adopt a separate budget of common expenses for the
  126  association. In addition, if the association maintains limited
  127  common elements with the cost to be shared only by those
  128  entitled to use the limited common elements as provided for in
  129  s. 718.113(1), the budget or a schedule attached to it must show
  130  the amount budgeted for this maintenance. If, after turnover of
  131  control of the association to the unit owners, any of the
  132  expenses listed in s. 718.504(21) are not applicable, they do
  133  not need to be listed.
  134         2.a. In addition to annual operating expenses, the budget
  135  must include reserve accounts for capital expenditures and
  136  deferred maintenance. These accounts must include, but are not
  137  limited to, roof replacement, building painting, and pavement
  138  resurfacing, regardless of the amount of deferred maintenance
  139  expense or replacement cost, and any other item that has a
  140  deferred maintenance expense or replacement cost that exceeds
  141  $10,000. The amount to be reserved for an item is determined by
  142  the association’s most recent structural integrity reserve study
  143  that must be completed by December 31, 2024. If the amount to be
  144  reserved for an item is not in the association’s initial or most
  145  recent structural integrity reserve study or the association has
  146  not completed a structural integrity reserve study, the amount
  147  must be computed using a formula based upon estimated remaining
  148  useful life and estimated replacement cost or deferred
  149  maintenance expense of the reserve item. In a budget adopted by
  150  an association that is required to obtain a structural integrity
  151  reserve study, reserves must be maintained for the items
  152  identified in paragraph (g) and the reserve amount for such
  153  items must be based on the findings and recommendations of the
  154  association’s most recent structural integrity reserve study.
  155  With respect to items for which an estimate of useful life is
  156  not readily ascertainable, an association must reserve the
  157  amount of deferred maintenance expense, if any, which is
  158  recommended by the structural integrity reserve study for such
  159  items. The association may adjust replacement reserve
  160  assessments annually to take into account an inflation
  161  adjustment and any changes in estimates or extension of the
  162  useful life of a reserve item caused by deferred maintenance.
  163  The members of a unit-owner-controlled association may
  164  determine, by a majority vote of the total voting interests of
  165  the association at a duly called meeting of the association, to
  166  provide no reserves or less reserves than required by this
  167  subsection. For a budget adopted on or after Effective December
  168  31, 2024, the members of a unit-owner-controlled association
  169  that must obtain a structural integrity reserve study may not
  170  determine to provide no reserves or less reserves than required
  171  by this subsection for items listed in paragraph (g), except
  172  that members of an association operating a multicondominium may
  173  determine to provide no reserves or less reserves than required
  174  by this subsection if an alternative funding method has been
  175  approved by the division.
  176         b. Before turnover of control of an association by a
  177  developer to unit owners other than a developer under s.
  178  718.301, the developer-controlled association may not vote to
  179  waive the reserves or reduce funding of the reserves. If a
  180  meeting of the unit owners has been called to determine whether
  181  to waive or reduce the funding of reserves and no such result is
  182  achieved or a quorum is not attained, the reserves included in
  183  the budget shall go into effect. After the turnover, the
  184  developer may vote its voting interest to waive or reduce the
  185  funding of reserves or approve contingent special assessments
  186  and lines of credit as provided in sub-subparagraph c.
  187         c.(I)In lieu of the reserve accounts required by this
  188  subparagraph, members of a unit-owner-controlled association may
  189  approve contingent special assessments against each unit to
  190  secure a line of credit for the association to provide available
  191  funding for deferred maintenance and replacement costs as
  192  needed. The line of credit and the contingent special
  193  assessments must be approved by a majority of the voting
  194  interests of the association. Upon approval by the members of
  195  the association and once a line of credit has been approved and
  196  made available to the board for the funding of the required
  197  deferred maintenance and replacement costs, the association must
  198  record a declaration of special assessments evidencing the levy
  199  of such special assessments in the public records.
  200         (II)Funding from the line of credit must be immediately
  201  available for access by the board to fund maintenance and
  202  replacement costs that come due, without further approval by the
  203  members of the association. At the option of a unit owner, the
  204  special assessment may be paid in full at the time it becomes
  205  due or the payment may be amortized over a term of years as
  206  provided for by the line of credit. However, a unit owner must
  207  be able to pay the remaining balance of the special assessment
  208  at any time during the amortization period.
  209         3. Reserve funds and any interest accruing thereon shall
  210  remain in the reserve account or accounts, and may be used only
  211  for authorized reserve expenditures unless their use for other
  212  purposes is approved in advance by a majority vote of all the
  213  total voting interests at a duly called meeting of the
  214  association. Before turnover of control of an association by a
  215  developer to unit owners other than the developer pursuant to s.
  216  718.301, the developer-controlled association may not vote to
  217  use reserves for purposes other than those for which they were
  218  intended. For a budget adopted on or after Effective December
  219  31, 2024, members of a unit-owner-controlled association that
  220  must obtain a structural integrity reserve study may not vote to
  221  use reserve funds, or any interest accruing thereon, that are
  222  reserved for items listed in paragraph (g) for any other purpose
  223  other than the replacement or deferred maintenance costs of the
  224  components listed in paragraph (g) their intended purpose.
  225         4. The only voting interests that are eligible to vote on
  226  questions that involve waiving or reducing the funding of
  227  reserves, or using existing reserve funds for purposes other
  228  than purposes for which the reserves were intended, are the
  229  voting interests of the units subject to assessment to fund the
  230  reserves in question. Proxy questions relating to waiving or
  231  reducing the funding of reserves or using existing reserve funds
  232  for purposes other than purposes for which the reserves were
  233  intended must contain the following statement in capitalized,
  234  bold letters in a font size larger than any other used on the
  235  face of the proxy ballot: WAIVING OF RESERVES, IN WHOLE OR IN
  236  PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY
  237  RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED
  238  SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.
  239         (g) Structural integrity reserve study.—
  240         1. A residential condominium An association must have a
  241  structural integrity reserve study completed at least every 10
  242  years after the condominium’s creation for each building on the
  243  condominium property that is three stories or higher in height
  244  as determined by the Florida Building Code which includes, at a
  245  minimum, a study of the following items as related to the
  246  structural integrity and safety of the building:
  247         a. Roof.
  248         b. Load-bearing walls or other primary structural members.
  249         c. Floor.
  250         d. Foundation.
  251         d.e. Fireproofing and fire protection systems.
  252         e.f. Plumbing.
  253         f.g. Electrical systems.
  254         g.h. Waterproofing and exterior painting.
  255         h.i. Windows and exterior doors.
  256         i.j. Any other item that has a deferred maintenance expense
  257  or replacement cost that exceeds $10,000 and the failure to
  258  replace or maintain such item negatively affects the items
  259  listed in sub-subparagraphs a.-h. sub-subparagraphs a.-i., as
  260  determined by the licensed engineer or architect performing the
  261  visual inspection portion of the structural integrity reserve
  262  study.
  263         2. A structural integrity reserve study is based on a
  264  visual inspection of the condominium property. A structural
  265  integrity reserve study may be performed by any person qualified
  266  to perform such study. However, the visual inspection portion of
  267  the structural integrity reserve study must be performed or
  268  verified by an engineer licensed under chapter 471, an architect
  269  licensed under chapter 481, or a person who is certified as a
  270  reserve specialist or professional reserve analyst by the
  271  Community Associations Institute or the Association of
  272  Professional Reserve Analysts.
  273         3.At a minimum, a structural integrity reserve study must
  274  identify each item of the condominium property being visually
  275  inspected, state the estimated remaining useful life and the
  276  estimated replacement cost or deferred maintenance expense of
  277  each item of the condominium property being visually inspected,
  278  and provide a reserve funding schedule with a recommended annual
  279  reserve amount that achieves the estimated replacement cost or
  280  deferred maintenance expense of each item of condominium
  281  property being visually inspected by the end of the estimated
  282  remaining useful life of the item. The structural integrity
  283  reserve study may recommend that reserves do not need to be
  284  maintained for any item for which an estimate of useful life and
  285  an estimate of replacement cost or deferred maintenance expense
  286  cannot be determined, or the study may recommend a deferred
  287  maintenance expense amount for such item.
  288         4.This paragraph does not apply to buildings less than
  289  three stories in height; single-family, two-family, or three
  290  family dwellings with three or fewer habitable stories above
  291  ground; any portion or component of a building that has not been
  292  submitted to the condominium form of ownership; or any portion
  293  or component of a building that is maintained by a party other
  294  than the association.
  295         5. Before a developer turns over control of an association
  296  to unit owners other than the developer, the developer must have
  297  a structural integrity reserve study completed for each building
  298  on the condominium property that is three stories or higher in
  299  height.
  300         6.3. Associations existing on or before July 1, 2022, which
  301  are controlled by unit owners other than the developer, must
  302  have a structural integrity reserve study completed by December
  303  31, 2024, for each building on the condominium property that is
  304  three stories or higher in height. An association that is
  305  required to complete a milestone inspection in accordance with
  306  s. 553.899 on or before December 31, 2026, may complete the
  307  structural integrity reserve study simultaneously with the
  308  milestone inspection. In no event may the structural integrity
  309  reserve study be completed after December 31, 2026.
  310         7. If the milestone inspection required by s. 553.899, or
  311  an inspection completed for a similar local requirement, was
  312  performed within the past 5 years and meets the requirements of
  313  this paragraph, such inspection may be used in place of the
  314  visual inspection portion of the structural integrity reserve
  315  study.
  316         8.4. If an association fails to complete a structural
  317  integrity reserve study pursuant to this paragraph, such failure
  318  is a breach of an officer’s and director’s fiduciary
  319  relationship to the unit owners under s. 718.111(1).
  320         (h) Mandatory milestone inspections.—If an association is
  321  required to have a milestone inspection performed pursuant to s.
  322  553.899, the association must arrange for the milestone
  323  inspection to be performed and is responsible for ensuring
  324  compliance with the requirements of s. 553.899. The association
  325  is responsible for all costs associated with the milestone
  326  inspection attributable to the portions of the building which
  327  the association is responsible for maintaining under the
  328  governing documents of the association. If the officers or
  329  directors of an association willfully and knowingly fail to have
  330  a milestone inspection performed pursuant to s. 553.899, such
  331  failure is a breach of the officers’ and directors’ fiduciary
  332  relationship to the unit owners under s. 718.111(1)(a). Within
  333  14 days after receipt of a written notice from the local
  334  enforcement agency that a milestone inspection is required, the
  335  association must notify the unit owners of the required
  336  milestone inspection and provide the date by which the milestone
  337  inspection must be completed. Such notice may be given by
  338  electronic submission to unit owners who consent to receive
  339  notice by electronic submission or by posting on the
  340  association’s website. Within 45 days after receiving Upon
  341  completion of a phase one or phase
  342  
  343  ====== D I R E C T O R Y  C L A U S E  A M E N D M E N T ======
  344  And the directory clause is amended as follows:
  345         Delete line 413
  346  and insert:
  347  718.111, Florida Statutes, is amended, and subsection (16) is
  348  added to that section, to read:
  349  
  350  ================= T I T L E  A M E N D M E N T ================
  351  And the title is amended as follows:
  352         Delete lines 43 - 50
  353  and insert:
  354         study”; amending s. 718.111, F.S.; requiring
  355         association boards to use best efforts to make prudent
  356         investment decisions; authorizing associations to
  357         invest funds in specified investment products;
  358         requiring authorizing boards to create an investment
  359         committee and adopt specified rules; requiring
  360         investment committees to recommend investment advisers
  361         to their boards; requiring the board to select one of
  362         the recommended investment advisers; providing
  363         qualifications for investment advisers; requiring
  364         investment committees to recommend a replacement
  365         investment adviser under certain circumstances;
  366         requiring associations to provide their investment
  367         adviser with certain documents at least annually;
  368         requiring investment advisers to annually review such
  369         documents and provide the association with a portfolio
  370         allocation model that meets specified requirements;
  371         requiring investment advisers to prepare funding
  372         projections; requiring that a specified amount of
  373         projected reserves as cash or cash equivalents be
  374         available to associations; providing that portfolios
  375         may not contain certain investments; requiring that
  376         certain funds be held in specified accounts; requiring
  377         the investment adviser to annually provide to the
  378         association a certain certification and list and to
  379         periodically submit certain reports; requiring that
  380         certain funds be made available to associations within
  381         a certain timeframe after they submit a written or
  382         electronic request; specifying that unallocated income
  383         earned on reserve fund investments may only be spent
  384         in a specified manner; requiring certain surplus funds
  385         to be managed in a specified manner; making technical
  386         changes; amending s. 718.112, F.S.; revising
  387         condominium association reserve account requirements;
  388         revising requirements relating to waiving reserve
  389         requirements or providing less reserves than required
  390         by law; revising requirements relating to using
  391         reserve funds or interest accrued on reserve funds for
  392         certain purposes; authorizing association members to
  393         approve certain special assessments and lines of
  394         credit for specified purposes; providing requirements
  395         for such special assessments and lines of credit;
  396         revising requirements for structural