On June 1, 2010, combined Florida Senate Bills 1196 and 1222 were signed by Governor Charlie Crist. The combined Bill includes significant amendments to Florida Statutes Chapter 718, the Condominium Act, and Florida Statutes Chapter 720, the Homeowners’ Association Act, and became effective July 1, 2010. This article examines the foreseeable impact of these Amendments on the liability exposure of community associations in the Directors and Officers (“D&O”) context.
Amendments were made to the portion of the Condominium Act that formerly obligated a condominium association to require each owner to provide proof of a currently effective policy of hazard and liability insurance.1 The bill also deleted the association’s former option of purchasing a policy of insurance on behalf of an owner, if the owner failed to provide a certificate of insurance within 30 days after a written request for such certificate was delivered. This relieves associations of some D&O liability, however, because a plaintiff may no longer claim that the association acted unreasonably in failing to procure a policy of insurance on behalf of an owner where the owner failed to provide proof of a currently effective insurance policy.
Both the Condominium Act and the Homeowners’ Association Act now require a tenant in a unit owned by a person who is late on their rent to the association up to the amount of future monetary obligations. The amendment also authorizes the association to sue a tenant who fails to pay rent for eviction.2 These amendments have been promoted by some as powerful tools for the collection of past due assessments. However, we also foresee claims arising from increasingly aggressive approaches to assessment collection. More eviction complaints will lead to more counterclaims for wrongful eviction. The association will be held to some of the procedural requirements of Florida’s Landlord-Tenant laws, and we foresee some growing pains as association attorneys adapt to what may be a new area of the law.
Other changes include an amended section 718.303, which now authorizes a condominium association to suspend, for a reasonable time, the right of a unit owner or the unit’s occupant, licensee, or invitee to use certain common elements if the unit owner is delinquent in the payment of any monetary obligation for more than 90 days until the obligation is paid. This section was also amended to allow for the suspension of voting rights if a unit owner is delinquent in the payment of any monetary obligation for more than 90 days until the obligation is paid.
Similarly, in the homeowners’ association context, section 720.305 was amended to authorize a homeowners’ association to suspend, for a reasonable time, the right of a member or member’s tenant, guest, or invitee to use certain common areas and facilities if a unit owner is delinquent in the payment of any monetary obligation for more than 90 days until the obligation is paid. This deleted the requirement that the governing documents provide for such suspension. The suspension process requires 14 days notice and an opportunity for a hearing.
We have already seen litigation arise over homeowners’ and condominium associations’ alleged failure to comply with procedural requirements. Now that every association has been extended the legal right to suspend, we foresee increasing litigation over this issue.
Furthermore, while there are now new tools for community associations in their struggle to cope with the current economic climate, the period of adaptation may be significant. Nevertheless, the new provisions clarify existing law and provide a more detailed roadmap for community associations in their enforcement of their governing documents. Accordingly, we believe that the long term impact will have the positive effect of decreasing and simplifying new claims.
1 Fla. Stat. § 718.111 (2010).
2 Fla. Stat. §§ 718.116, 720.3085, Fla. Stat. (2010).
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