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GT Alert

Proposed Legislation from Homeowners’ Association Task Force

March 2004
By Michael J. Sabatello, Greenberg Traurig

Click for information on Adobe Acrobat.  View or download the PDF version of this Alert here.


The Florida Legislature is considering significant changes to the rules and regulations governing homeowners’ associations under Chapter 720, Florida Statutes. If adopted, the proposed changes will have a material impact on residential real estate developers in the State, and home owner controlled homeowners’ associations. The following Alert briefly describes the genesis of these proposed changes and the impacts they may have if enacted by the Legislature.

Michael J. Sabatello
"If adopted, the proposed changes will have a material impact on residential real estate developers in the State, and home owner controlled homeowners’ associations."

Homeowners’ associations in Florida are governed by Sections 720.301 - .312, Florida Statutes, the Florida Not For Profit Corporation Act, Chapter 617, Florida Statutes, and common law. The current statutory and regulatory framework applicable to homeowners’ associations in Florida provides basic standards for residential developers creating community developments and basic protections for purchasers of property in such communities. This framework is far less complex than that imposed on condominium developers and purchasers under Chapter 718, Florida Statutes. The proposed legislation moves homeowners’ associations closer to condominium treatment.

In 2003, Governor Bush organized the Homeowners’ Association Task Force (the “Task Force”), which was chaired by Secretary Carr of the Department of Business and Professional Regulation. The Task Force has spent several months surveying the current law applicable to and various issues involving homeowners’ associations and has recently released a Final Report (the “Report”) in February 2004 proposing new legislation.

The Report proposes several dramatic changes to the laws applicable to homeowners’ associations.

1. Contractual Disclosure and 3 Day Right of Rescission.

The Report proposes to:

  • Broaden the contractual disclosure currently required by 689.26, Florida Statutes to include more detailed information on the association;
  • Obligate the seller of property governed by an association to deliver to the prospective purchaser the revised 689.26 disclosure along with copies of the current association documents, budget and newly required financial statements (see below); and
  • Grant the purchaser the right to cancel a contract to purchase within 3 days from the receipt of the required association documents.

2. Claims for False or Misleading Information.

A cause of action is created for a purchaser who has relied upon “any material statement or information that is false or misleading” and published by the developer. Under this provision, a purchaser will have the right to rescind a contract before closing and recover damages after closing, and to recover their attorneys’ fees if they prevail.

3. New Statutory Warranty for Common Elements.

New statutory warranties for fitness and merchantability are proposed, exposing developers and their contractors to further liability:

  • A three year warranty from the developer for all common areas, which runs from the completion of the building or improvement, or one year after transfer of control of the association, but not longer than five years after completion of the building;
  • Matching warranties for all personal property for the same period as provided by the manufacturer; and
  • A three year warranty from all contractors, subcontractors, and suppliers as to the roof, structural components and mechanical and plumbing elements of all buildings, and a one year warranty for all other improvements and materials.

4. Financial Reports.

The Report proposes more specific financial reporting standards for associations, depending on the total annual revenue of the particular association — compiled financial statements will be required for smaller associations, and audited financial statements will be required for larger associations.

5. Restrictions on the Developer’s Use of Association Funds.

A developer will be prohibited from spending association funds to defend a civil, criminal or administrative action concerning any claim filed against the developer and/or the association for misleading information or the operation of the developer controlled association.

6. Prohibition of SLAPP Suits.

In order to deter the use of a strategic lawsuit against public participation, or “SLAPP” suit, the proposed legislation prohibits SLAPP suits and provides for the award of treble damages and attorneys’ fees to a prevailing defendant. An association will also be prohibited from using its funds to prosecute a SLAPP suit.

7. Right to Fly the Flag.

Association members will have the right to display the United States flag and the official flag of the State of Florida, and on certain holidays the flags of the individual branches of the Armed Services.

8. Alternative Dispute Resolution.

Alternative methods of dispute resolution, such as arbitration and mediation, are provided for and mandated in certain contexts.

9. Meeting Participation & Records Access for Members.

Members of the association will be given the right to participate in all meetings of the members and the board of directors. Further, mailed written notice will be required when special assessments or changes to the documents are being considered, and members will be given more access to the records of the association.

The proposed legislation, if adopted without refinement, will make the development of residential communities more expensive, will expose the developers of residential communities to more extensive liabilities and will make the management and operation of homeowners’ associations more complex.

The Report is available at http://www.myflorida.com/dbpr/os/hot_topics/hoa_taskforce/index.shtml.

We are in the process of assisting our clients in reviewing a legislative strategy to address the proposed legislation.

 

© 2004 Greenberg Traurig


Additional Information:

For more information, please review our Real Estate Practice description, or feel free to contact one of our attorneys.


This GT ALERT is issued for informational purposes only and is not intended to be construed or used as general legal advice. Greenberg Traurig attorneys provide practical, result-oriented strategies and solutions tailored to meet our clients’ individual legal needs.