Florida Senate - 2021                                    SB 1490
       By Senator Pizzo
       38-00245C-21                                          20211490__
    1                        A bill to be entitled                      
    2         An act relating to investments by condominium
    3         associations; amending s. 718.111, F.S.; requiring
    4         condominium associations to maintain a copy of their
    5         investment policy statement as an official record;
    6         authorizing associations to invest funds in specified
    7         investment products; requiring certain association
    8         boards to annually develop an investment policy
    9         statement and select an investment adviser who meets
   10         specified requirements; authorizing investment fees
   11         and commissions to be paid from invested reserve funds
   12         or operating funds; requiring investment advisers to
   13         invest certain operating or reserve funds in
   14         compliance with a specified rule; requiring investment
   15         advisers to act as association fiduciaries; providing
   16         construction; requiring that certain funds be held in
   17         specified accounts; requiring associations to provide
   18         their investment adviser with certain documents at
   19         least annually; requiring investment advisers to
   20         annually review such documents and provide the
   21         association with a portfolio allocation model that
   22         meets specified requirements; providing that
   23         portfolios may not contain certain investments;
   24         requiring investment advisers to annually provide to
   25         the association a certain certification and to
   26         periodically submit certain reports; requiring that
   27         certain funds be made available to associations within
   28         a certain timeframe after they submit a written or
   29         electronic request; requiring that a certified public
   30         accountant at least annually provide associations with
   31         specified information; amending s. 718.112, F.S.;
   32         specifying that certain votes are required to make
   33         specified investments; specifying that only certain
   34         voting interests may vote on questions that involve
   35         certain investments; amending s. 718.3026, F.S.;
   36         exempting registered investment advisers from certain
   37         provisions relating to contracts for products and
   38         services; providing an effective date.
   40  Be It Enacted by the Legislature of the State of Florida:
   42         Section 1. Paragraph (a) of subsection (12) of section
   43  718.111, Florida Statutes, is amended, and subsection (16) is
   44  added to that section, to read:
   45         718.111 The association.—
   46         (12) OFFICIAL RECORDS.—
   47         (a) From the inception of the association, the association
   48  shall maintain each of the following items, if applicable, which
   49  constitutes the official records of the association:
   50         1. A copy of the plans, permits, warranties, and other
   51  items provided by the developer pursuant to s. 718.301(4).
   52         2. A photocopy of the recorded declaration of condominium
   53  of each condominium operated by the association and each
   54  amendment to each declaration.
   55         3. A photocopy of the recorded bylaws of the association
   56  and each amendment to the bylaws.
   57         4. A certified copy of the articles of incorporation of the
   58  association, or other documents creating the association, and
   59  each amendment thereto.
   60         5. A copy of the current rules of the association.
   61         6. A book or books that contain the minutes of all meetings
   62  of the association, the board of administration, and the unit
   63  owners.
   64         7. A current roster of all unit owners and their mailing
   65  addresses, unit identifications, voting certifications, and, if
   66  known, telephone numbers. The association shall also maintain
   67  the e-mail addresses and facsimile numbers of unit owners
   68  consenting to receive notice by electronic transmission. The e
   69  mail addresses and facsimile numbers are not accessible to unit
   70  owners if consent to receive notice by electronic transmission
   71  is not provided in accordance with sub-subparagraph (c)3.e.
   72  However, the association is not liable for an inadvertent
   73  disclosure of the e-mail address or facsimile number for
   74  receiving electronic transmission of notices.
   75         8. All current insurance policies of the association and
   76  condominiums operated by the association.
   77         9. A current copy of any management agreement, lease, or
   78  other contract to which the association is a party or under
   79  which the association or the unit owners have an obligation or
   80  responsibility.
   81         10. Bills of sale or transfer for all property owned by the
   82  association.
   83         11. Accounting records for the association and separate
   84  accounting records for each condominium that the association
   85  operates. Any person who knowingly or intentionally defaces or
   86  destroys such records, or who knowingly or intentionally fails
   87  to create or maintain such records, with the intent of causing
   88  harm to the association or one or more of its members, is
   89  personally subject to a civil penalty pursuant to s.
   90  718.501(1)(d). The accounting records must include, but are not
   91  limited to:
   92         a. Accurate, itemized, and detailed records of all receipts
   93  and expenditures.
   94         b. A current account and a monthly, bimonthly, or quarterly
   95  statement of the account for each unit designating the name of
   96  the unit owner, the due date and amount of each assessment, the
   97  amount paid on the account, and the balance due.
   98         c. All audits, reviews, accounting statements, and
   99  financial reports of the association or condominium.
  100         d. All contracts for work to be performed. Bids for work to
  101  be performed are also considered official records and must be
  102  maintained by the association.
  103         12. Ballots, sign-in sheets, voting proxies, and all other
  104  papers and electronic records relating to voting by unit owners,
  105  which must be maintained for 1 year from the date of the
  106  election, vote, or meeting to which the document relates,
  107  notwithstanding paragraph (b).
  108         13. All rental records if the association is acting as
  109  agent for the rental of condominium units.
  110         14. A copy of the current question and answer sheet as
  111  described in s. 718.504.
  112         15. All other written records of the association not
  113  specifically included in the foregoing which are related to the
  114  operation of the association.
  115         16. A copy of the inspection report as described in s.
  116  718.301(4)(p).
  117         16.17. Bids for materials, equipment, or services.
  118         17.A copy of the investment policy statement adopted
  119  pursuant to sub-subparagraph (16)(b)1.a.
  120         18.All other written records of the association not
  121  specifically included in the foregoing which are related to the
  122  operation of the association.
  124         (a)Unless otherwise prohibited in the declaration, and in
  125  accordance with s. 718.112(2)(f), an association, including a
  126  multicondominium association, may invest any funds in one or any
  127  combination of investment products described in this subsection.
  128         (b)If an association invests funds in any type of
  129  investment product other than a depository account described in
  130  s. 215.47(1)(h), the association must meet all of the following
  131  requirements:
  132         1.a.The board shall annually develop and adopt a written
  133  investment policy statement and select an investment adviser who
  134  is registered under s. 517.12 and who is not related by affinity
  135  or consanguinity to any board member or unit owner. Any
  136  investment fees and commissions may be paid from the invested
  137  reserve funds or operating funds.
  138         b.The investment adviser selected by the board shall
  139  invest any funds not deposited into a depository account
  140  described in s. 215.47(1)(h) by the board and shall comply with
  141  the prudent investor rule in s. 518.11. The investment adviser
  142  shall act as a fiduciary to the association in compliance with
  143  the standards set forth in the Employee Retirement Income
  144  Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A)-(C). In case
  145  of conflict with other provisions of law authorizing
  146  investments, the investment and fiduciary standards set forth in
  147  this sub-subparagraph shall prevail.
  148         c.Any funds invested under this subparagraph must be held
  149  in third-party custodial accounts and are subject to insurance
  150  coverage by the Securities Investor Protection Corporation in an
  151  amount equal to or greater than the assets held.
  152         2.At least once each calendar year, the association shall
  153  provide the investment adviser with the association’s investment
  154  policy statement, the most recent reserve study report or a good
  155  faith estimate disclosing the annual amount of reserve funds
  156  which would be necessary for the association to fully fund
  157  reserves for each reserve item, and the financial reports
  158  prepared pursuant to subsection (13). The investment adviser
  159  shall annually review these documents and provide the
  160  association with a portfolio allocation model that is suitably
  161  structured to match projected reserve fund and liability
  162  liquidity requirements. There must be at least 36 months of
  163  projected reserves in cash or cash equivalents available to the
  164  association at all times.
  165         (c)Portfolios managed by the investment adviser may
  166  contain any type of investment necessary to meet the objectives
  167  in the investment policy statement; however, portfolios may not
  168  contain stocks, securities, or other obligations that the State
  169  Board of Administration is prohibited from investing in under
  170  ss. 215.471, 215.4725, and 215.473 or that state agencies are
  171  prohibited from investing in under s. 215.472, as determined by
  172  the investment adviser.
  173         (d)The investment adviser shall:
  174         1.Annually provide the association with a written
  175  certification of compliance with this section; and
  176         2.Submit monthly, quarterly, and annual reports to the
  177  association which are prepared in accordance with investment
  178  industry standards.
  179         (e)Any principal, earnings, or interest managed under this
  180  subsection must be available at no cost or charge to the
  181  association within 15 business days after delivery of the
  182  association’s written or electronic request.
  183         (f)At least once each calendar year, the association must
  184  select a certified public accountant to provide the association
  185  with a statement verifying the invested fund transactions and a
  186  report of cash receipts and disbursements for the invested
  187  funds.
  188         Section 2. Paragraph (f) of subsection (2) of section
  189  718.112, Florida Statutes, is amended to read:
  190         718.112 Bylaws.—
  191         (2) REQUIRED PROVISIONS.—The bylaws shall provide for the
  192  following and, if they do not do so, shall be deemed to include
  193  the following:
  194         (f) Annual budget.—
  195         1. The proposed annual budget of estimated revenues and
  196  expenses must be detailed and must show the amounts budgeted by
  197  accounts and expense classifications, including, at a minimum,
  198  any applicable expenses listed in s. 718.504(21). A
  199  multicondominium association shall adopt a separate budget of
  200  common expenses for each condominium the association operates
  201  and shall adopt a separate budget of common expenses for the
  202  association. In addition, if the association maintains limited
  203  common elements with the cost to be shared only by those
  204  entitled to use the limited common elements as provided for in
  205  s. 718.113(1), the budget or a schedule attached to it must show
  206  the amount budgeted for this maintenance. If, after turnover of
  207  control of the association to the unit owners, any of the
  208  expenses listed in s. 718.504(21) are not applicable, they need
  209  not be listed.
  210         2.a. In addition to annual operating expenses, the budget
  211  must include reserve accounts for capital expenditures and
  212  deferred maintenance. These accounts must include, but are not
  213  limited to, roof replacement, building painting, and pavement
  214  resurfacing, regardless of the amount of deferred maintenance
  215  expense or replacement cost, and any other item that has a
  216  deferred maintenance expense or replacement cost that exceeds
  217  $10,000. The amount to be reserved must be computed using a
  218  formula based upon estimated remaining useful life and estimated
  219  replacement cost or deferred maintenance expense of each reserve
  220  item. The association may adjust replacement reserve assessments
  221  annually to take into account any changes in estimates or
  222  extension of the useful life of a reserve item caused by
  223  deferred maintenance. This subsection does not apply to an
  224  adopted budget in which the members of an association have
  225  determined, by a majority vote at a duly called meeting of the
  226  association, to provide no reserves or less reserves than
  227  required by this subsection.
  228         b. Before turnover of control of an association by a
  229  developer to unit owners other than a developer pursuant to s.
  230  718.301, the developer may vote the voting interests allocated
  231  to its units to waive the reserves or reduce the funding of
  232  reserves through the period expiring at the end of the second
  233  fiscal year after the fiscal year in which the certificate of a
  234  surveyor and mapper is recorded pursuant to s. 718.104(4)(e) or
  235  an instrument that transfers title to a unit in the condominium
  236  which is not accompanied by a recorded assignment of developer
  237  rights in favor of the grantee of such unit is recorded,
  238  whichever occurs first, after which time reserves may be waived
  239  or reduced only upon the vote of a majority of all nondeveloper
  240  voting interests voting in person or by limited proxy at a duly
  241  called meeting of the association. If a meeting of the unit
  242  owners has been called to determine whether to waive or reduce
  243  the funding of reserves and no such result is achieved or a
  244  quorum is not attained, the reserves included in the budget
  245  shall go into effect. After the turnover, the developer may vote
  246  its voting interest to waive or reduce the funding of reserves.
  247         3. Reserve funds and any earnings interest accruing thereon
  248  shall remain in the reserve account or accounts, and may be used
  249  only for authorized reserve expenditures unless their use for
  250  other purposes, including investing funds pursuant to s.
  251  718.111(16), is approved in advance by a majority vote at a duly
  252  called meeting of the association. Before turnover of control of
  253  an association by a developer to unit owners other than the
  254  developer pursuant to s. 718.301, the developer-controlled
  255  association may not vote to use reserves for purposes other than
  256  those for which they were intended, including investing funds
  257  pursuant to s. 718.111(16), without the approval of a majority
  258  of all nondeveloper voting interests, voting in person or by
  259  limited proxy at a duly called meeting of the association.
  260         4. The only voting interests that are eligible to vote on
  261  questions that involve waiving or reducing the funding of
  262  reserves, or using existing reserve funds for purposes other
  263  than purposes for which the reserves were intended, including
  264  investing funds pursuant to s. 718.111(16), are the voting
  265  interests of the units subject to assessment to fund the
  266  reserves in question. Proxy questions relating to waiving or
  267  reducing the funding of reserves or using existing reserve funds
  268  for purposes other than purposes for which the reserves were
  269  intended, including investing funds pursuant to s. 718.111(16),
  270  must contain the following statement in capitalized, bold
  271  letters in a font size larger than any other used on the face of
  272  the proxy ballot: WAIVING OF RESERVES, IN WHOLE OR IN PART, OR
  276         Section 3. Paragraph (a) of subsection (2) of section
  277  718.3026, Florida Statutes, is amended to read:
  278         718.3026 Contracts for products and services; in writing;
  279  bids; exceptions.—Associations with 10 or fewer units may opt
  280  out of the provisions of this section if two-thirds of the unit
  281  owners vote to do so, which opt-out may be accomplished by a
  282  proxy specifically setting forth the exception from this
  283  section.
  284         (2)(a) Notwithstanding the foregoing, contracts with
  285  employees of the association, and contracts for attorney,
  286  accountant, architect, community association manager, timeshare
  287  management firm, engineering, registered investment adviser, and
  288  landscape architect services are not subject to the provisions
  289  of this section.
  290         Section 4. This act shall take effect July 1, 2021.