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It's The Law: The Condominium Act Changes Considerably In 2010 Part I

Question: I understand our Legislature adopted significant amendments to the Condominium Act this year. Can you explain?

Answer: This year’s Legislature made significant changes to Florida’s Condominium Act, Cooperative Act and Homeowner’s Association Act (Chapters 718, 719 and 720 of Florida Statutes) and related Statutes. Senate Bill 1196, as modified, was over 50 pages long and signed into law by the Governor on June 1, 2010. The new law became effective July 1, 2010. My response to your question will address changes to the Condominium Act (the Act).

Many of the changes were made due to the mortgage meltdown. In particular, most bulk assignees or bulk buyers of condominium units are now excluded from definition of a developer and addressed in the newly enacted Distressed Condominium Relief Act, Section 718.701 - 708 of Florida Statutes.

The new law defines a bulk assignee as one who acquires more than 7 condominium parcels and receives an assignment of some or all of the rights of the developer. It differentiates a bulk buyer, which is a person acquiring more than 7 condominium parcels but who does not receive an assignment of developer rights, other than the right to conduct sales, leasing and marketing and other limited rights. By statute, a bulk assignee assumes virtually all of the developer’s rights and obligations under both the Condominium Act and the Declaration of Condominium. A bulk buyer is generally free from the developer’s obligations and liabilities unless expressly assumed or assigned to the bulk buyer, except that both bulk assignee and bulk buyer must file an updated prospectus with the Division of Florida Condominiums, Time Shares and Mobile Homes before offering any units for sale or lease for a term exceeding 5 years. The prospectus must be provided to all buyers.

The statute is awkwardly worded, but it also appears to require filing with the Division any limitation of warranties assumed by the bulk assignee or bulk buyer and that the bulk assignee or buyer provide that disclosure to purchasers as well. Bulk assignees may inherit a developer’s freedom from requirements concerning sale or lease of units in the Declaration of Condominium bulk buyers are not entitled to any exemptions afforded a developer or successor developer regarding sale or lease of a unit.

In making these changes, the Legislature hopes to encourage bulk purchases of distressed units by eliminating liability a bulk buyer would otherwise inherit as a successor developer. It is hoped that encouraging bulk purchases will benefit distressed properties by injection of new ownership and payment assessments as they accrue by encouraging bulk purchase for resale.

Insurance was again addressed. Definition of what a unit owner policy must insure has been deleted. Requirement that such policies have special assessment coverage of no less than $2,000.00 per occurrence and other provisions have been moved to Section 627.714 Florida Statues.

Associations remain obligated to provide copies of official records (with the exception of confidential matters) to owners upon request. The Act has been amended to specify that Associations are not responsible for use or misuse of the information provided to a member, if that information is provided in accordance with the statutory mandate. Confidential information which cannot be disclosed is expanded to include personnel records of the Association, personal information about owners, electronic security measures used by the Association to safeguard data and the software and operating system used by the Association which allows manipulation of data.

Candidates for the Board face easier requirements, but those elected have more obligations. Under the old statute, if no person was interested in running for the position of a Board member whose term has expired, the Board member was automatically reappointed. The new Statute provides that if the number of Board members whose terms have expired exceeds the number of eligible members showing interest in the vacant positions, such Board members are eligible for reappointment and are not automatically reappointed. Co-owners of a unit were prohibited from serving as members of the Board of Directors at the same time, but now can serve if they own more than one unit or if there are not enough eligible candidates to fill vacancies on the Board at time of a vacancy.

Last year, candidates for the Board had to sign a certification that the candidate had read and understood the governing documents of the Association, the Condominium Act and any applicable rules. Under the new law, only those elected to the Board have that burden and they have 90 days after being elected or appointed to provide that certification, plus certify the Board member has read the association’s written policies, will work to uphold such documents and policies to the best of his or her ability and will faithfully discharge his or her fiduciary responsibility to the association’s members. Alternatively, the new director may submit a certification of satisfactory completion of the educational curriculum administered by a division-approved condominium education provider.

Failure to timely provide the certification is an automatic suspension until compliance with the statue.

Next week’s article will continue explanation of the new condominium law. In the interim, remember that new laws often create problems and confusion and that you will be well served to discuss these changes with an experienced attorney.

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