TOP STORY, JULY: HOA Legislation

Throughout the holiday week, YourObserver.com will be counting down the top 12 stories of 2010 (one from each month) from our Longboat, East County and Sarasota Observers. Check back each day for a reprinting — and any relevant updates — of the biggest news items of the year.

ORIGINALLY PUBLISHED JULY 15, 2010.

MANATEE COUNTY — At a time when many condominium and homeowner associations have been forced to raise assessments because of non-payment or foreclosures, the state Legislature has been working to give associations more tools for moving forward.

Senate Bill 1196, which went into effect July 1, contains key provisions aimed at helping condominium and homeowners associations collect assessments owed to them, and consequently, help keep association fees down for members who are paying.

“It’s a step in the right direction,” said David Muller, an attorney with Becker & Poliakoff and co-executive director of the firm’s Community Association Leadership Lobby. “It provides associations more tools to try to collect delinquencies.”

The bill is not perfect and likely will require a few tweaks at next year’s legislative session, but overall is good, Muller said.

For condominium associations, SB 1196 makes several promising changes. First, the bill increases the “statutory cap” a first mortgagee must pay upon foreclosure. In years past, condominium associations were paid back the lesser of six months worth of delinquent dues or 1% of the original mortgage debt. The new rule requires the mortgagee to pay the lesser of 12 months of delinquent dues or 1% of the original mortgage debt, which is the same as existing law for HOAs.

The change could result in thousands of extra dollars going to associations in foreclosure cases that have dragged out for several years. For example, if condo association dues are $300 a month on a $300,000 home that has been in foreclosure for one year, the first-mortgage holder would have only been required to pay $1,800 of the total owed in years past. Under the new legislation, the mortgagee would have to pay $3,000, or 1% of the mortgage (still less than the $3,600 owed in monthly assessments).

Second, the law allows condo associations to collect delinquent dues directly from tenants if the unit owner is renting the property but failing to pay his or her monthly assessments. There are provisions to protect the tenant, including that his or her liability cannot exceed their rent amount, among others, Muller said.

Third, associations now may suspend the voting rights of unit members who are delinquent for more than 90 days in paying their assessments. Associations even can suspend their rights to use common amenities such as a community pool. The association cannot suspend the use of some common elements such as elevators and parking lots.

Allison Cohen, president of the Greenbrook Walk Condominium Association, said the changes will help recreate a feeling of equity.

“It’s (an issue of) fairness,” she said. “People in the neighborhood — they want to see that things are being done.”

Finally, the new law eliminates HO-6 mandatory insurance by removing the requirement that associations must require proof of insurance from their condo owners, among other changes.

HOAs are reaping similar benefits. HOAs now can suspend use rights and voting rights if homeowners are more than 90 days overdue in paying assessments, regardless of whether such a provision is contained in the association documents. Additionally, associations now can levy fines of up to $1,000, regardless of whether that ability is defined in association documents.

As with condominium associations, HOAs now can collect assessments directly from tenants if the unit owner is not paying assessments. The law provides the same protections and provisions as seen with condo associations.

Other modifications in HOA law include changes to what constitutes official records and how to conduct “secret ballot” elections, among other items.

Muller said groups lobbying on behalf of condo and homeowner associations have been working to see such changes for nearly three years. Similar bills passed in both the Senate and House of Representatives last year but were vetoed by Gov. Charlie Crist because of his concerns with a provision regarding the retrofitting of sprinklers in high-rise condominium complexes.

Contact Pam Eubanks at [email protected].