Senate Bill sb2358
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Florida Senate - 2006 SB 2358
By Senator Bennett
21-1067A-06 See HB 839
1 A bill to be entitled
2 An act relating to homeowners' associations;
3 amending s. 720.303, F.S.; revising the powers
4 and duties of homeowners' associations;
5 requiring certain associations to be
6 incorporated in this state; removing a
7 provision authorizing associations to operate
8 more than one community; prohibiting officers
9 and directors from taking any action that is
10 inconsistent with the declaration of covenants;
11 authorizing associations to settle actions on
12 appeal; revising procedures relating to legal
13 actions commenced by the association; lowering
14 the dollar amount for which the association
15 must obtain approval by the members of the
16 association before proceeding with the legal
17 action; authorizing the association to enter
18 into certain contracts; removing provisions
19 authorizing an association to have more than
20 one class of members and to issue membership
21 certificates; prohibiting certain association
22 defenses; prohibiting associations from
23 restricting a member's freedom of association
24 and from limiting the number of guests a member
25 may have within a 24-hour period; providing
26 that officers and directors of an association
27 may be personally liable for damages under
28 certain circumstances; providing compensation
29 for certain members under certain
30 circumstances; providing criteria for
31 establishing setback limits; prohibiting the
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 association from denying or refusing to approve
2 a member's plans for building on the member's
3 property under certain circumstances; requiring
4 the budget to provide for annual operating
5 expenses; requiring the budget to include
6 reserve accounts for capital expenditures and
7 deferred maintenance; providing the amount to
8 be reserved; authorizing the association to
9 adjust replacement reserve assessments
10 annually; authorizing the developer to vote to
11 waive the reserves or reduce the funding of
12 reserves for a certain period; revising
13 provisions relating to financial reporting;
14 revising time periods in which the association
15 must complete its reporting; amending s.
16 720.307, F.S.; requiring developers to deliver
17 financial records to the board; requiring
18 certain information to be included in the
19 records and for the records to be prepared in a
20 specified manner; amending s. 720.308, F.S.;
21 providing that a guarantee of common expenses
22 shall be effective under certain circumstances;
23 requiring the guarantee to meet certain
24 requirements; authorizing the guarantee to
25 provide certain requirements; requiring the
26 stated dollar amount of the guarantee to be an
27 exact dollar amount for each parcel identified
28 in the declaration; providing payments required
29 from the guarantor to be determined in a
30 certain manner; providing a formula to
31 determine the guarantor's total financial
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 obligation to the association; providing that
2 certain expenses incurred in the production of
3 certain revenues shall not be included in the
4 common expenses; providing an effective date.
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6 Be It Enacted by the Legislature of the State of Florida:
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8 Section 1. Subsections (1), (6), and (7) of section
9 720.303, Florida Statutes, are amended to read:
10 720.303 Association powers and duties; meetings of
11 board; official records; budgets; financial reporting;
12 association funds; recalls.--
13 (1) POWERS AND DUTIES.--
14 (a) An association which operates a community as
15 defined in s. 720.301, must be incorporated in this state,
16 operated by an association that is a Florida corporation.
17 After October 1, 1995, the association must be incorporated
18 and the initial governing documents must be recorded in the
19 official records of the county in which the community is
20 located. An association may operate more than one community.
21 (b) The officers and directors of an association have
22 a fiduciary relationship to the members of who are served by
23 the association.
24 (c) The powers and duties of an association include
25 those set forth in this chapter and, except as expressly
26 limited or restricted in this chapter, those specifically set
27 forth in the governing documents. The officers and directors
28 of the association may not take any action that is
29 inconsistent with the declaration of covenants.
30 (d) After control of the association is obtained by
31 members from the developers other than the developer, the
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 association may institute, maintain, or settle on, or appeal
2 actions or hearings in its name on behalf of the all members
3 concerning matters of common interest to the members,
4 including, but not limited to, the common areas; roof or
5 structural components of a building, or other improvements for
6 which the association is responsible; mechanical, electrical,
7 or plumbing elements serving an improvement or building for
8 which the association is responsible; representations of the
9 developer pertaining to any existing or proposed commonly used
10 facility; and protesting ad valorem taxes on commonly used
11 facilities. The association may defend actions in eminent
12 domain or bring inverse condemnation actions. Before
13 commencing any legal action litigation against any party in
14 the name of the association involving amounts in controversy
15 in excess of $50,000 $100,000, the association must obtain the
16 affirmative approval of a majority of the members of the
17 association voting interests at a meeting of the association
18 membership at which a quorum is present has been attained.
19 (e) The association may enter into contracts for the
20 benefit of the members of the association, including, but not
21 limited to, contracts for maintaining, repairing, or improving
22 the common areas of the association. This subsection does not
23 limit any statutory or common-law right of any individual
24 member or class of members to bring any action without
25 participation by the association.
26 (f) A member does not have the authority to act for
27 the association by virtue of being a member of the
28 association. An association may have more than one class of
29 members and may issue membership certificates.
30 (g) In any action between a member and the
31 association, it shall not be a defense by the association that
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 the association's actions, although inconsistent with the
2 declaration of covenants, have been uniformly applied.
3 (h) An association may not restrict a member's freedom
4 of association and may not limit the number of guests a member
5 may have within a 24-hour period.
6 (i) An association of 15 or fewer parcels parcel
7 owners may enforce only the requirements of those deed
8 restrictions established prior to the purchase of each parcel
9 upon an affected parcel owner or owners.
10 (j) The officers and directors of an association may
11 be personally liable for damages to a member if there is clear
12 and convincing evidence that the actions of the officers and
13 directors demonstrate a pattern of behavior designed to harass
14 a member of the association.
15 (k) Any action of the association by and through the
16 officers and directors that limits the legal use of any
17 portion of a member's property which is inconsistent with the
18 declaration of covenants shall entitle the member to
19 compensation for the fair market value of that portion of the
20 member's property the use of which is being restricted.
21 (l) In any association with more than 50 but fewer
22 than 75 parcels, for purposes of establishing setback limits,
23 any parcel of 1 acre or less shall be deemed to have one front
24 for purposes of determining the required front setback, if
25 any. Only those setbacks specifically set forth in the
26 declaration of covenants may be enforced by the association.
27 Where the covenants are silent, the applicable county or
28 municipal setbacks shall apply.
29 (m) The association may not deny or refuse to approve
30 a member's plans for building on the member's property unless
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 the plan under consideration violates a specific provision of
2 the declaration of covenants.
3 (6) BUDGETS.--
4 (a) The association shall prepare an annual budget
5 providing for the annual operating expenses. The budget must
6 reflect the estimated revenues and expenses for that year and
7 the estimated surplus or deficit as of the end of the current
8 year. The budget must set out separately all fees or charges
9 for recreational amenities, whether owned by the association,
10 the developer, or another person. The association shall
11 provide each member with a copy of the annual budget or a
12 written notice that a copy of the budget is available upon
13 request at no charge to the member. The copy must be provided
14 to the member within the time limits set forth in subsection
15 (5).
16 (b) In addition to annual operating expenses, the
17 budget shall include reserve accounts for capital expenditures
18 and deferred maintenance. These accounts shall include, but
19 are not limited to, roof replacement, building painting, and
20 pavement resurfacing, regardless of the amount of deferred
21 maintenance expense or replacement cost, and any other item
22 for which the deferred maintenance expense or replacement cost
23 exceeds $10,000. The amount to be reserved shall be computed
24 by means of a formula that is based upon estimated remaining
25 useful life and estimated replacement cost or deferred
26 maintenance expense of each reserve item. The association may
27 adjust replacement reserve assessments annually to take into
28 account any changes in estimates or extension of the useful
29 life of a reserve item caused by deferred maintenance. This
30 paragraph does not apply to an adopted budget for which the
31 members of an association have determined, by a majority vote
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 at a duly called meeting of the association, to provide no
2 reserves or fewer reserves than required by this paragraph.
3 However, prior to turnover of control of an association by a
4 developer to unit owners, the developer may vote to waive the
5 reserves or reduce the funding of reserves for the first 2
6 fiscal years of the association's operation, beginning with
7 the fiscal year in which the initial declaration is recorded,
8 after which time reserves may be waived or reduced only upon
9 the vote of a majority of all nondeveloper voting interests
10 voting in person or by limited proxy at a duly called meeting
11 of the association. If a meeting of the unit owners has been
12 called to determine whether to waive or reduce the funding of
13 reserves and no such result is achieved or a quorum is not
14 attained, the reserves as included in the budget shall go into
15 effect. After the turnover, the developer may vote its voting
16 interest to waive or reduce the funding of reserves.
17 (7) FINANCIAL REPORTING.--Within 90 days after the end
18 of the fiscal year, or annually on the date provided in the
19 bylaws, the association shall prepare and complete, or
20 contract for the preparation and completion of, a an annual
21 financial report for the preceding fiscal year. Within 21 60
22 days after the final financial report is completed by the
23 association or received from the third party, but not later
24 than 120 days after the end of the fiscal year or other date
25 as provided in the bylaws, close of the fiscal year. the
26 association shall, within the time limits set forth in
27 subsection (5), provide each member with a copy of the annual
28 financial report or a written notice that a copy of the
29 financial report is available upon request at no charge to the
30 member. Financial reports shall be prepared as follows:
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 (a) An association that meets the criteria of this
2 paragraph shall prepare or cause to be prepared a complete set
3 of financial statements in accordance with generally accepted
4 accounting principles as adopted by the Board of Accountancy.
5 The financial statements shall be based upon the association's
6 total annual revenues, as follows:
7 1. An association with total annual revenues of
8 $100,000 or more, but less than $200,000, shall prepare
9 compiled financial statements.
10 2. An association with total annual revenues of at
11 least $200,000, but less than $400,000, shall prepare reviewed
12 financial statements.
13 3. An association with total annual revenues of
14 $400,000 or more shall prepare audited financial statements.
15 (b)1. An association with total annual revenues of
16 less than $100,000 shall prepare a report of cash receipts and
17 expenditures.
18 2. An association in a community of fewer than 50
19 parcels, regardless of the association's annual revenues, may
20 prepare a report of cash receipts and expenditures in lieu of
21 financial statements required by paragraph (a) unless the
22 governing documents provide otherwise.
23 3. A report of cash receipts and disbursement must
24 disclose the amount of receipts by accounts and receipt
25 classifications and the amount of expenses by accounts and
26 expense classifications, including, but not limited to, the
27 following, as applicable: costs for security, professional,
28 and management fees and expenses; taxes; costs for recreation
29 facilities; expenses for refuse collection and utility
30 services; expenses for lawn care; costs for building
31 maintenance and repair; insurance costs; administration and
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 salary expenses; and reserves if maintained by the
2 association.
3 (c) If 20 percent of the parcel owners petition the
4 board for a level of financial reporting higher than that
5 required by this section, the association shall duly notice
6 and hold a meeting of members within 30 days of receipt of the
7 petition for the purpose of voting on raising the level of
8 reporting for that fiscal year. Upon approval of a majority of
9 the total voting interests of the parcel owners, the
10 association shall prepare or cause to be prepared, shall amend
11 the budget or adopt a special assessment to pay for the
12 financial report regardless of any provision to the contrary
13 in the governing documents, and shall provide within 90 days
14 of the meeting or the end of the fiscal year, whichever occurs
15 later:
16 1. Compiled, reviewed, or audited financial
17 statements, if the association is otherwise required to
18 prepare a report of cash receipts and expenditures;
19 2. Reviewed or audited financial statements, if the
20 association is otherwise required to prepare compiled
21 financial statements; or
22 3. Audited financial statements if the association is
23 otherwise required to prepare reviewed financial statements.
24 (d) If approved by a majority of the voting interests
25 present at a properly called meeting of the association, an
26 association may prepare or cause to be prepared:
27 1. A report of cash receipts and expenditures in lieu
28 of a compiled, reviewed, or audited financial statement;
29 2. A report of cash receipts and expenditures or a
30 compiled financial statement in lieu of a reviewed or audited
31 financial statement; or
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 3. A report of cash receipts and expenditures, a
2 compiled financial statement, or a reviewed financial
3 statement in lieu of an audited financial statement.
4 Section 2. Paragraph (t) is added to subsection (3) of
5 section 720.307, Florida Statutes, to read:
6 720.307 Transition of association control in a
7 community.--With respect to homeowners' associations:
8 (3) At the time the members are entitled to elect at
9 least a majority of the board of directors of the homeowners'
10 association, the developer shall, at the developer's expense,
11 within no more than 90 days deliver the following documents to
12 the board:
13 (t) The financial records, including financial
14 statements of the association, and source documents from the
15 incorporation of the association through the date of turnover.
16 The records shall be audited by an independent certified
17 public accountant for the period from the incorporation of the
18 association or from the period covered by the last audit, if
19 an audit has been performed for each fiscal year since
20 incorporation. All financial statements shall be prepared in
21 accordance with generally accepted accounting principles and
22 shall be audited in accordance with generally accepted
23 auditing standards, as prescribed by the Board of Accountancy,
24 pursuant to chapter 473. The certified public accountant
25 performing the audit shall examine to the extent necessary
26 supporting documents and records, including the cash
27 disbursements and related paid invoices to determine whether
28 expenditures were for association purposes and the billings,
29 cash receipts, and related records to determine whether the
30 developer was charged and paid the proper amounts of
31 assessments.
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 Section 3. Section 720.308, Florida Statutes, is
2 amended to read:
3 720.308 Assessments and charges.--
4 (1) For any community created after October 1, 1995,
5 the governing documents must describe the manner in which
6 expenses are shared and specify the member's proportional
7 share thereof. Assessments levied pursuant to the annual
8 budget or special assessment must be in the member's
9 proportional share of expenses as described in the governing
10 document, which share may be different among classes of
11 parcels based upon the state of development thereof, levels of
12 services received by the applicable members, or other relevant
13 factors. While the developer is in control of the homeowners'
14 association, it may be excused from payment of its share of
15 the operating expenses and assessments related to its parcels
16 for any period of time for which the developer has, in the
17 declaration, obligated itself to pay any operating expenses
18 incurred that exceed the assessments receivable from other
19 members and other income of the association. This subsection
20 section does not apply to an association, no matter when
21 created, if the association is created in a community that is
22 included in an effective development-of-regional-impact
23 development order as of the effective date of this act,
24 together with any approved modifications thereto.
25 (2) If a guarantee of common expenses is not included
26 in the purchase contracts, declaration, or prospectus, any
27 agreement establishing a guarantee shall be effective only
28 upon the approval of a majority of the voting interests of the
29 members other than the developer. Approval shall be expressed
30 at a meeting of the members, voting in person or by limited
31 proxy, or by agreement in writing without a meeting if
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 provided in the bylaws. Such guarantee shall meet the
2 requirements of this section.
3 (a) The period of time for the guarantee shall be
4 indicated by a specific beginning and ending date or event.
5 The ending date or event shall be the same for all of the
6 members of a homeowners' association, including members in
7 different phases of the homeowners' association.
8 (b) The guarantee may provide:
9 1. Different intervals of time during a guarantee
10 period with different dollar amounts for each such interval.
11 2. That after the initial stated period the developer
12 has an option to extend the guarantee for one or more
13 additional stated periods. The extension of a guarantee is
14 limited to extending the ending date or event; therefore, the
15 developer does not have the option of changing the level of
16 assessments guaranteed.
17 (3) The stated dollar amount of the guarantee shall be
18 an exact dollar amount for each parcel identified in the
19 declaration. Regardless of the stated dollar amount of the
20 guarantee, assessments charged to a member shall not exceed
21 the maximum obligation of the member based on the total amount
22 of the adopted budget and the member's proportionate ownership
23 share of the common elements.
24 (4) The cash payments required from the guarantor
25 during the guarantee period shall be determined as follows:
26 (a) If at any time during the guarantee period the
27 funds collected from member assessments at the guaranteed
28 level and other revenues collected by the association are not
29 sufficient to provide payment, on a timely basis, of all
30 common expenses, including the full funding of the reserves
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 unless properly waived, the guarantor shall advance sufficient
2 cash to the association at the time such payments are due.
3 (b) Expenses incurred in the production of
4 non-assessment revenues, which expenses are not in excess of
5 the non-assessment revenues, shall not be included in the
6 common expenses. If the expenses attributable to
7 non-assessment revenues exceed non-assessment revenues, only
8 the excess expenses must be funded by the guarantor. For
9 example, if the association operates a rental program in which
10 rental expenses exceed rental revenues, the guarantor shall
11 fund the rental expenses in excess of the rental revenues.
12 Interest earned on the investment of association funds may be
13 used to pay the income tax expense incurred as a result of the
14 investment, such expense shall not be charged to the
15 guarantor, and the net investment income shall be retained by
16 the association. Each such non-assessment, revenue-generating
17 activity shall be considered separately. Capital contributions
18 collected from members are not revenues and shall not be used
19 to pay common expenses.
20 (5) The guarantor's total financial obligation to the
21 association at the end of the guarantee period shall be
22 determined on the accrual basis using the following formula:
23 the guarantor shall fund the total common expenses incurred
24 during the guarantee period, including the full funding of the
25 reserves unless properly waived, less the total regular
26 periodic assessments earned by the association from the
27 members other than the guarantor during the guarantee period,
28 regardless of whether the actual level charged was less than
29 the maximum guaranteed amount.
30 (6) Expenses incurred in the production of
31 non-assessment revenues, which expenses are not in excess of
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Florida Senate - 2006 SB 2358
21-1067A-06 See HB 839
1 the non-assessment revenues, shall not be included in the
2 common expenses. If the expenses attributable to
3 non-assessment revenues exceed non-assessment revenues, only
4 the excess expenses must be funded by the guarantor. For
5 example, if the association operates a rental program in which
6 rental expenses exceed rental revenues, the guarantor shall
7 fund the rental expenses in excess of the rental revenues.
8 Interest earned on the investment of association funds may be
9 used to pay the income tax expense incurred as a result of the
10 investment, such expense shall not be charged to the
11 guarantor, and the net investment income shall be retained by
12 the association. Each such non-assessment, revenue-generating
13 activity shall be considered separately. Capital contributions
14 collected from members are not revenues and shall not be used
15 to pay common expenses.
16 Section 4. This act shall take effect July 1, 2006.
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