Florida Senate - 2021                             CS for SB 1490
       By the Committee on Community Affairs; and Senator Pizzo
       578-03317-21                                          20211490c1
    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         requiring associations that make certain investments
    7         to prepare financial statements in a specified manner;
    8         authorizing associations to invest funds in specified
    9         investment products; requiring certain association
   10         boards to obtain prior approval before investing funds
   11         in certain investment products, annually develop an
   12         investment policy statement, and select an investment
   13         adviser who meets specified requirements; authorizing
   14         investment fees and commissions to be paid from
   15         invested reserve funds or operating funds; requiring
   16         investment advisers to invest certain operating or
   17         reserve funds in compliance with a specified rule;
   18         requiring investment advisers to act as association
   19         fiduciaries; providing construction; requiring that
   20         certain funds be held in specified accounts; requiring
   21         associations to provide their investment adviser with
   22         certain documents at least annually; requiring
   23         investment advisers to annually review such documents
   24         and provide the association with a portfolio
   25         allocation model that meets specified requirements;
   26         providing that portfolios may not contain certain
   27         investments; requiring investment advisers to annually
   28         provide to the association a certain certification and
   29         to periodically submit certain reports; requiring that
   30         certain funds be made available to associations within
   31         a certain timeframe after they submit a written or
   32         electronic request; amending s. 718.3026, F.S.;
   33         exempting registered investment advisers from certain
   34         provisions relating to contracts for products and
   35         services; providing an effective date.
   37  Be It Enacted by the Legislature of the State of Florida:
   39         Section 1. Paragraph (a) of subsection (12) and subsection
   40  (13) of section 718.111, Florida Statutes, are amended, and
   41  subsection (16) is added to that section, to read:
   42         718.111 The association.—
   43         (12) OFFICIAL RECORDS.—
   44         (a) From the inception of the association, the association
   45  shall maintain each of the following items, if applicable, which
   46  constitutes the official records of the association:
   47         1. A copy of the plans, permits, warranties, and other
   48  items provided by the developer pursuant to s. 718.301(4).
   49         2. A photocopy of the recorded declaration of condominium
   50  of each condominium operated by the association and each
   51  amendment to each declaration.
   52         3. A photocopy of the recorded bylaws of the association
   53  and each amendment to the bylaws.
   54         4. A certified copy of the articles of incorporation of the
   55  association, or other documents creating the association, and
   56  each amendment thereto.
   57         5. A copy of the current rules of the association.
   58         6. A book or books that contain the minutes of all meetings
   59  of the association, the board of administration, and the unit
   60  owners.
   61         7. A current roster of all unit owners and their mailing
   62  addresses, unit identifications, voting certifications, and, if
   63  known, telephone numbers. The association shall also maintain
   64  the e-mail addresses and facsimile numbers of unit owners
   65  consenting to receive notice by electronic transmission. The e
   66  mail addresses and facsimile numbers are not accessible to unit
   67  owners if consent to receive notice by electronic transmission
   68  is not provided in accordance with sub-subparagraph (c)3.e.
   69  However, the association is not liable for an inadvertent
   70  disclosure of the e-mail address or facsimile number for
   71  receiving electronic transmission of notices.
   72         8. All current insurance policies of the association and
   73  condominiums operated by the association.
   74         9. A current copy of any management agreement, lease, or
   75  other contract to which the association is a party or under
   76  which the association or the unit owners have an obligation or
   77  responsibility.
   78         10. Bills of sale or transfer for all property owned by the
   79  association.
   80         11. Accounting records for the association and separate
   81  accounting records for each condominium that the association
   82  operates. Any person who knowingly or intentionally defaces or
   83  destroys such records, or who knowingly or intentionally fails
   84  to create or maintain such records, with the intent of causing
   85  harm to the association or one or more of its members, is
   86  personally subject to a civil penalty pursuant to s.
   87  718.501(1)(d). The accounting records must include, but are not
   88  limited to:
   89         a. Accurate, itemized, and detailed records of all receipts
   90  and expenditures.
   91         b. A current account and a monthly, bimonthly, or quarterly
   92  statement of the account for each unit designating the name of
   93  the unit owner, the due date and amount of each assessment, the
   94  amount paid on the account, and the balance due.
   95         c. All audits, reviews, accounting statements, and
   96  financial reports of the association or condominium.
   97         d. All contracts for work to be performed. Bids for work to
   98  be performed are also considered official records and must be
   99  maintained by the association.
  100         12. Ballots, sign-in sheets, voting proxies, and all other
  101  papers and electronic records relating to voting by unit owners,
  102  which must be maintained for 1 year from the date of the
  103  election, vote, or meeting to which the document relates,
  104  notwithstanding paragraph (b).
  105         13. All rental records if the association is acting as
  106  agent for the rental of condominium units.
  107         14. A copy of the current question and answer sheet as
  108  described in s. 718.504.
  109         15. All other written records of the association not
  110  specifically included in the foregoing which are related to the
  111  operation of the association.
  112         16. A copy of the inspection report as described in s.
  113  718.301(4)(p).
  114         16.17. Bids for materials, equipment, or services.
  115         17.A copy of the investment policy statement adopted
  116  pursuant to sub-subparagraph (16)(b)2.
  117         18.All other written records of the association not
  118  specifically included in the foregoing which are related to the
  119  operation of the association.
  120         (13) FINANCIAL REPORTING.—Within 90 days after the end of
  121  the fiscal year, or annually on a date provided in the bylaws,
  122  the association shall prepare and complete, or contract for the
  123  preparation and completion of, a financial report for the
  124  preceding fiscal year. Within 21 days after the final financial
  125  report is completed by the association or received from the
  126  third party, but not later than 120 days after the end of the
  127  fiscal year or other date as provided in the bylaws, the
  128  association shall mail to each unit owner at the address last
  129  furnished to the association by the unit owner, or hand deliver
  130  to each unit owner, a copy of the most recent financial report
  131  or a notice that a copy of the most recent financial report will
  132  be mailed or hand delivered to the unit owner, without charge,
  133  within 5 business days after receipt of a written request from
  134  the unit owner. The division shall adopt rules setting forth
  135  uniform accounting principles and standards to be used by all
  136  associations and addressing the financial reporting requirements
  137  for multicondominium associations. The rules must include, but
  138  not be limited to, standards for presenting a summary of
  139  association reserves, including a good faith estimate disclosing
  140  the annual amount of reserve funds that would be necessary for
  141  the association to fully fund reserves for each reserve item
  142  based on the straight-line accounting method. This disclosure is
  143  not applicable to reserves funded via the pooling method. In
  144  adopting such rules, the division shall consider the number of
  145  members and annual revenues of an association. Financial reports
  146  shall be prepared as follows:
  147         (a) An association that meets the criteria of this
  148  paragraph shall prepare a complete set of financial statements
  149  in accordance with generally accepted accounting principles. The
  150  financial statements must be based upon the association’s total
  151  annual revenues, as follows:
  152         1. An association with total annual revenues of $150,000 or
  153  more, but less than $300,000, shall prepare compiled financial
  154  statements.
  155         2. An association with total annual revenues of at least
  156  $300,000, but less than $500,000, shall prepare reviewed
  157  financial statements.
  158         3. An association with total annual revenues of $500,000 or
  159  more shall prepare audited financial statements.
  160         (b)1. An association with total annual revenues of less
  161  than $150,000 shall prepare a report of cash receipts and
  162  expenditures.
  163         2. A report of cash receipts and disbursements must
  164  disclose the amount of receipts by accounts and receipt
  165  classifications and the amount of expenses by accounts and
  166  expense classifications, including, but not limited to, the
  167  following, as applicable: costs for security, professional and
  168  management fees and expenses, taxes, costs for recreation
  169  facilities, expenses for refuse collection and utility services,
  170  expenses for lawn care, costs for building maintenance and
  171  repair, insurance costs, administration and salary expenses, and
  172  reserves accumulated and expended for capital expenditures,
  173  deferred maintenance, and any other category for which the
  174  association maintains reserves.
  175         (c) An association may prepare, without a meeting of or
  176  approval by the unit owners:
  177         1. Compiled, reviewed, or audited financial statements, if
  178  the association is required to prepare a report of cash receipts
  179  and expenditures;
  180         2. Reviewed or audited financial statements, if the
  181  association is required to prepare compiled financial
  182  statements; or
  183         3. Audited financial statements if the association is
  184  required to prepare reviewed financial statements.
  185         (d) Unless an association invests funds pursuant to
  186  paragraph (16)(b), and only if approved by a majority of the
  187  voting interests present at a properly called meeting of the
  188  association, an association may prepare:
  189         1. A report of cash receipts and expenditures in lieu of a
  190  compiled, reviewed, or audited financial statement;
  191         2. A report of cash receipts and expenditures or a compiled
  192  financial statement in lieu of a reviewed or audited financial
  193  statement; or
  194         3. A report of cash receipts and expenditures, a compiled
  195  financial statement, or a reviewed financial statement in lieu
  196  of an audited financial statement.
  198  Such meeting and approval must occur before the end of the
  199  fiscal year and is effective only for the fiscal year in which
  200  the vote is taken, except that the approval may also be
  201  effective for the following fiscal year. If the developer has
  202  not turned over control of the association, all unit owners,
  203  including the developer, may vote on issues related to the
  204  preparation of the association’s financial reports, from the
  205  date of incorporation of the association through the end of the
  206  second fiscal year after the fiscal year in which the
  207  certificate of a surveyor and mapper is recorded pursuant to s.
  208  718.104(4)(e) or an instrument that transfers title to a unit in
  209  the condominium which is not accompanied by a recorded
  210  assignment of developer rights in favor of the grantee of such
  211  unit is recorded, whichever occurs first. Thereafter, all unit
  212  owners except the developer may vote on such issues until
  213  control is turned over to the association by the developer. Any
  214  audit or review prepared under this section shall be paid for by
  215  the developer if done before turnover of control of the
  216  association.
  217         (e)If an association invests funds pursuant to paragraph
  218  (16)(b), the association must prepare financial statements
  219  pursuant to paragraphs (a) and (b).
  221         (a)Unless otherwise prohibited in the declaration, and in
  222  accordance with s. 718.112(2)(f), an association, including a
  223  multicondominium association, may invest any funds in one or any
  224  combination of investment products described in this subsection.
  225         (b)If an association invests funds in any type of
  226  investment product other than a depository account described in
  227  s. 215.47(1)(h), the association must meet all of the following
  228  requirements:
  229         1.The board must obtain prior approval by a majority vote
  230  of the unit owners or all nondeveloper voting interests at a
  231  duly called meeting of the association before investing funds in
  232  investment products other than a depository account described in
  233  s. 215.47(1)(h).
  234         2.The board must develop a written investment policy
  235  statement and such statement must be annually approved during a
  236  budget meeting. An investment policy statement must, at minimum,
  237  address:
  238         a.Liquidity;
  239         b.Safety;
  240         c.Yield;
  241         d.Short-term and long-term goals;
  242         e.Authorized investments;
  243         f.The mix of investments allowed; and
  244         g.The limits of authority relative to investment
  245  transactions.
  246         3.The board must select an investment adviser who is
  247  registered under s. 517.12 and who is not related by affinity or
  248  consanguinity to any board member or unit owner. Any investment
  249  fees and commissions may be paid from the invested reserve funds
  250  or operating funds. The investment adviser selected by the board
  251  shall invest any funds not deposited into a depository account
  252  described in s. 215.47(1)(h) by the board and shall comply with
  253  the prudent investor rule in s. 518.11. The investment adviser
  254  shall act as a fiduciary to the association in compliance with
  255  the standards set forth in the Employee Retirement Income
  256  Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A)-(C). In case
  257  of conflict with other provisions of law authorizing
  258  investments, the investment and fiduciary standards set forth in
  259  this subparagraph shall prevail.
  260         4.At least once each calendar year, the association shall
  261  provide the investment adviser with the association’s investment
  262  policy statement, the most recent reserve study report or a good
  263  faith estimate disclosing the annual amount of reserve funds
  264  which would be necessary for the association to fully fund
  265  reserves for each reserve item, and the financial reports
  266  prepared pursuant to subsection (13). The investment adviser
  267  shall annually review these documents and provide the
  268  association with a portfolio allocation model that is suitably
  269  structured to match projected reserve fund and liability
  270  liquidity requirements. There must be at least 36 months of
  271  projected reserves in cash or cash equivalents available to the
  272  association at all times.
  273         (c)Portfolios managed by the investment adviser may
  274  contain any type of investment necessary to meet the objectives
  275  in the investment policy statement; however, portfolios may not
  276  contain stocks, securities, or other obligations that the State
  277  Board of Administration is prohibited from investing in under
  278  ss. 215.471, 215.4725, and 215.473 or that state agencies are
  279  prohibited from investing in under s. 215.472, as determined by
  280  the investment adviser.
  281         (d)The investment adviser shall:
  282         1.Annually provide the association with a written
  283  certification of compliance with this section; and
  284         2.Submit monthly, quarterly, and annual reports to the
  285  association which are prepared in accordance with investment
  286  industry standards.
  287         (e)Any principal, earnings, or interest managed under this
  288  subsection must be available at no cost or charge to the
  289  association within 15 business days after delivery of the
  290  association’s written or electronic request.
  291         Section 2. Paragraph (a) of subsection (2) of section
  292  718.3026, Florida Statutes, is amended to read:
  293         718.3026 Contracts for products and services; in writing;
  294  bids; exceptions.—Associations with 10 or fewer units may opt
  295  out of the provisions of this section if two-thirds of the unit
  296  owners vote to do so, which opt-out may be accomplished by a
  297  proxy specifically setting forth the exception from this
  298  section.
  299         (2)(a) Notwithstanding the foregoing, contracts with
  300  employees of the association, and contracts for attorney,
  301  accountant, architect, community association manager, timeshare
  302  management firm, engineering, registered investment adviser, and
  303  landscape architect services are not subject to the provisions
  304  of this section.
  305         Section 3. This act shall take effect July 1, 2021.