Community Association Relief – It’s about time!
On June 1, 2010, there was a big sigh of relief across the state of Florida. We all heard it. On that day, the Florida residential community associations’ voice was heard. In a stunning reversal from the year before, Florida Governor Crist elected not to veto Senate Bill 1196 and House Bill 561, also referred to as the Distressed Community Association Relief Act. Long overdue, the Act will finally provide some much needed relief to distressed condominium and homeowner associations, and their law-abiding members, when it goes into effect on July 1, 2010.
The Act will instantly aid associations in the collection of past due assessments. How much so depends on several variables, including the number of delinquent unit owners who are residents, those with tenants, and those with vacant or abandoned units. One thing is certain. The Act will substantially reduce the total number of free loader tenants and deadbeat unit owners.
First and foremost, the Act provides authority to associations to collect rents directly from the tenants of delinquent owners to pay down past due assessments. This measure will immediately increase an association’s cash flow and enhance its operating budget. This will prevent delinquent owners who are renting their units and failing to pay their assessments from reaping a financial windfall or unjust enrichment. It will also curtail the problem of free loader tenants living in abandoned units. Adding teeth to the association’s enforcement powers, the Act enables associations to evict those tenants who fail to comply.
The Act may also diminish the rights of delinquent owners and their tenants. Amending Florida Statutes § 718.303, the Act provides for the suspension of use rights, as well as voter rights, of any unit owner more than ninety days past due in payment of their assessments. Although associations will not be permitted to suspend use of limited common elements, including parking spaces, elevators, or utility services, or prevent access to and from units, the Act does allow for suspension of use rights of other common elements such as recreational areas within the condominium. Consequently, the suspension of the delinquent owners’ use rights also suspends the use rights of their tenants. However, the association must first provide written notice to the unit owner and hold a meeting and vote before suspending use rights.
To further assist condominium associations, the Act requires lenders that acquire title to units of delinquent ownes through foreclosure (or deed in lieu) to cover the lesser of twelve months of unpaid assessments (up from six months) or 1% of the mortgage debt. This puts condominium associations on level footing with homeowner associations. As condominium associations are able to collect a greater portion of maintenance fees that were formerly uncollectible, paying unit owners may see relief from the prospect of increased fees.
Some people, particularly delinquent unit owners and the attorneys that represent them, may argue the new law gives the associations too much power. However, unit owners who are current in their monthly maintenance fees, and who face increased assessments due to non-payment by other owners, strongly disagree. They would argue that associations should be provided with greater authority, including the ability to rent out vacant and abandoned units.
In short, the Act is an important step, but additional steps are needed. Other states facing a foreclosure crisis, such as Nevada, California, and Arizona, should take heed.
Amir Isaiah, JD, L.L.M, is Director of Receivership and Fiduciary Services for Kaufman, Rossin & Co., one of the top CPA firms in Florida. He can be reached at aisaiah@kaufmanrossin.com
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