Attention Florida Homebuilders: New Laws Governing Homeowners’ Associations
Await Governor Bush’s Signature
By Michael J. Sabatello, IV,
Esq., Greenberg Traurig
View or download the PDF version of this Alert
In its most recent 2004 session, the Florida Legislature adopted, and
has sent to Governor Bush for execution, SB 2984 and SB 1184 (collectively,
the “Bills”). These new laws will significantly change the rules applicable
to Florida homebuilders and homeowners’ associations. Although significant
portions of the Bills resulted from the work of the Homeowners’ Association
Task Force organized by Governor Bush in 2003, not all of the suggestions
of the Task Force were adopted, and new concepts were included in the Bills.
This Alert briefly describes some of the new changes that will be implemented
if the Bills become law.
|"If these new provisions become
law, homebuilders will have to take greater care in preparing their
declarations of restrictions and contract materials to make sure
that they comply with the new laws and adequately provide for the
development of the community as the builder intends."
1. Contract Disclosures. The Bills move former Section 689.26, F.S.,
to Chapter 720 and amend the required disclosure under that provision. Developers
may have to begin using the new disclosures as early as July 1, 2004. If
a homebuilder fails to provide a prospective buyer with the required disclosure
summary before the buyer signs the purchase contract, the buyer may void
the contract within three days after receiving the disclosure summary. The
buyer cannot waive this cancellation right, but the right terminates automatically
at closing. We are currently working with our homebuilder clients to revise
their contract documents to include the requisite provisions.
2. Publication of False and Misleading Information. The Bills create
Section 720.602, F.S. Under this new section, a new cause of action against
a homebuilder is created if a buyer has relied upon any material statement
or information published by the homebuilder that is false or misleading.
As a remedy, the buyer is given the right to rescind the contract or recover
damages before closing, or to recover damages after closing, and to recover
attorneys’ fees and costs. It is important to note that false or misleading
information published in any advertisements, sales materials, contract documents,
closing documents and homeowners’ association materials can give rise to
liability. Homebuilders are strongly advised to carefully review their promotional
materials, contracts, recorded covenants, articles and bylaws in order to
avoid any liability under this new section. These provisions may become
effective as early as July 1, 2004.
3. Administration and Management of Associations.
- Association Contracts. Effective as early as July 1, 2004, new requirements
for association contracts will apply. These new rules may significantly
impact the traditional operation of the association by the developer prior
to turnover to the residents:
- An association must obtain competitive bids for all significant contracts
for services, materials and equipment, i.e., contracts that will consume
ten percent or more of the association’s budget. This will apply to agreements
between the association and the developer and its affiliates;
- All contracts for the provision of services must be in writing;
- All contracts for the purchase or rental of equipment or materials
must be in writing if they will not be fully performed within one year;
- Contracts with employees of the association, and its attorneys, engineers,
association manager, and architects, and contracts entered into before October,
2004, are exempt from the new requirements.
- Association Financial Reporting. New, more elaborate annual reporting
requirements will be imposed on associations beginning October 1, 2004.
Once effective, Section 720.303, F.S., will break down reporting requirements
based on the size of an association’s revenues, as follows:
- An association with annual revenues greater than $400,000 must prepare
audited financial statements;
- An association with annual revenues falling between $200,000 and $400,000
must prepare reviewed financial statements;
- An association with annual revenues falling between $100,000 and $200,000
must prepare compiled financial statements;
- An association with annual revenues less than $100,000 must prepare
a report of receipts and expenditures; and
- An association with fewer than 50 parcels may elect to prepare a report
of receipts and expenditures, regardless of its annual revenues.
Further, an association may change the level of reporting required if
approved by the members.
- Association Record Keeping. As of October 1, 2004, the definition
of the official records of an association will be updated to include the
required statutory disclosure (as amended) and a “catch-all” provision for
any other written records. Members will have broad rights to access and
copy these records, although the Bills protect some records from access.
- Beginning on October 1, 2004, association funds may not be used by
a developer to defend any civil or criminal proceeding against the developer
or the directors appointed by the developer.
- New procedures will be established for the recall of directors, effective
October 1, 2004.
- Effective as early as July 1, 2004, a fine levied by an association
against an owner will no longer be a lien on that owner’s property, although
the association is entitled to recover the reasonable attorneys’ fees incurred
to collect the fine.
4. Members’ Rights to Participate in Governance.
- Board Meetings. The Bills add several provisions to Section 720.303, F.S., granting the following new rights to association members:
- The right to speak at any board meeting, although the board may prescribe
rules of decorum;
- The right to 14 days’ notice when the board will consider an assessment
or a change to the rules governing the use of property in the community;
- The right to have the board address a proper homeowner petition.
As a consequence, homebuilders must be more vigilant in holding their
annual board and member meetings, and should take care to ensure that each
meeting is noticed and conducted properly to protect the integrity of each
budget and the corresponding assessment. These new requirements will become
effective October 1, 2004.
- Meetings of Members. The Bills amend Section 720.306, F.S., to require
actual notice to members of all member meetings. The bylaws of an association
can specify the notice procedures, but if the bylaws are silent, the new
statutory provisions will apply. The Bills also give members the right to
attend and speak at any membership meeting, although the board may prescribe
rules of decorum. Unlike the provisions regarding board meetings, the provisions
regarding member meetings may take effect as early as July 1, 2004.
5. Prohibition on SLAPPs. To discourage the use of Strategic Lawsuits
Against Public Participation (SLAPP suits), the Bills provide for Section
720.304, F.S., to be amended to prohibit the filing of a frivolous lawsuit,
counter-claim, or cross-claim against any owner solely because the owner
has exercised the right to petition the government. The owner is entitled
to recover treble damages and attorneys’ fees if it is determined that a
SLAPP suit was inappropriately filed against the owner. Further, an association
will be prohibited from using association funds to prosecute a SLAPP suit.
These provisions will take effect October 1, 2004.
6. Acquisition and Use of Defibrillator. Homeowners’ associations, as
of October 1, 2004, will be included among those organizations protected
under the Cardiac Arrest Survival Act (Section 768.1325, F.S.) from higher
insurance premiums and liability arising out of the installation of a defibrillator
at their premises.
7. Revival of Declaration of Covenants and Association. As of October
1, 2004, new sections 720.404 through 720.407, F.S., will be created, establishing
procedures for reviving a restrictive covenant and association that no longer
governs a community.
8. Special Provisions for Small Communities. Section 720.303, F.S., is
revised to prohibit a homeowners’ association of fewer than 15 owners from
enforcing a provision or rule against a particular parcel owner if the provision
was established after the purchase of that parcel by the current owner.
As of October 1, 2004, homebuilders in small communities must be careful
to have the complete declaration of covenants and all community rules in
place before the first retail closing. A homebuilder’s ability to amend
the declaration of covenants and revise the community rules will be greatly
restricted under this new provision.
9. Additional Member Rights. Beginning on October 1, 2004, an individual
parcel owner will have the right to construct a medically necessary access
ramp on the owner’s property, place a security sign within 10 feet of the
owner’s dwelling, and display a military service flag on certain national
10. Alternative Dispute Resolution. The Bills provide for alternative
methods of dispute resolution such as mediation and arbitration. For example,
disputes concerning board elections must be submitted to binding arbitration,
but other disputes, such as those about meetings, use rights, etc., must
be submitted to mediation. These provisions may take effect as early as
July 1, 2004.
It is important to note that the Task Force’s proposed statutory warranties
for the common areas of a development were not included in the Bills and
that this Alert does not address the Bills’ changes to the laws regulating
condominiums, cooperatives, and community development districts.
If these new provisions become law, homebuilders will have to take greater
care in preparing their declarations of restrictions and contract materials
to make sure that they comply with the new laws and adequately provide for
the development of the community as the builder intends. Homebuilders will
also need to pay more attention to the operation and management of their
controlled associations and more closely adhere to the required corporate
formalities to protect the integrity of their budgets and assessments and
to minimize potential liability to their homeowners.
© 2004 Greenberg Traurig
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.