ANALYSIS HB 913 (ER) -- CONDO 3.0

CHAPTER XX

• Co-Operatives – FS 719: Line 3537 – 4328

The bill provides new responsibilities and duties of the board and association in managing operating and reserve funds of the association.   On the one hand, this promotes efficiency, and, on the other hand, at what cost this efficiency means to owners in the future?    Perhaps what “best efforts” on prudent investment decisions should be more clearly clarified since decisions are made without a vote of the unit owners.

 

Section 20. Subsection (13) (a) and (b) are added to section 719.104, Florida Statutes, to read:

(13).    INVESTMENT OF ASSOCIATION FUNDS.

 

(a) A board shall, in fulfilling its duty to manage operating and reserve funds of its association, use best efforts to make prudent investment decisions that carefully consider risk and return in an effort to maximize returns on invested funds. 

(b) An association may invest reserve funds in one or any combination of certificates of deposit or in depository accounts at a community bank, savings bank, commercial bank, savings and loan association, or credit union without a vote of the unit owners.

• The bill provides that the local building inspector determines whether a building is unhabitable;  provides issues on  structural integrity reserve studies are  to cover roof, structure, fire protection, plumbing, electrical, waterproofing, windows and any item costing over $25,000 to repair/replace; methods for pause of certain portion of reserves on budgets adopted before December 31, 2028 who have passed the milestone inspection.

Section 21. Paragraphs (j) and (k) of subsection (1) of section 719.106, Florida Statutes, are amended.

• The bill amends 719.106(1)(j)2.a. to increase the reserve amount from $10,000 to $25,000 or the inflation-adjusted amount determined by the division under subparagraph 6., whichever amount is greater.  This is without regard of the amount of the deferred maintenance expense or replacement cost that exceeds $25,000 or the inflation-adjusted amount set by the division under subparagraph 6., whichever amount is greater.

The  bill adds a new paragraph 719.106(1)(j)2.d. reflecting that if the local building official determines the building uninhabitable due to a natural emergency, the board may pause contribution to its reserves or reduce reserve funding.

 

d. If the local building official as defined in s. 468.603, determines that the entire cooperative building is uninhabitable due to a natural emergency as defined in s. 252.34, the board may pause the contribution to its reserves or reduce reserve funding until the local building official determines that the cooperative building is habitable. Any reserve account funds held by the association may be expended, pursuant to the board's determination, to make the cooperative building and its structures habitable. Upon the determination by the local building official that the cooperative building is habitable, the association must immediately resume contributing funds to its reserves.

 

3.a.(I) Reserves for the items identified in paragraph (g) may be funded by regular assessments, special assessments, lines of credit, or loans. A special assessment, a line of credit, or a loan under this sub-subparagraph requires the approval of a majority vote of the total voting interests of the association.

 

(II) A unit-owner-controlled association that is required to have a structural reserve study may secure a line of credit or a loan to fund capital expenses required by a milestone inspection under s. 553.899 or a structural integrity reserve study. The lines of credit or loans must be sufficient to fund the cumulative amount of any previously waived or unfunded portion of the reserve funding amount required by this paragraph and the most recent structural integrity reserve study. Funding from the line of credit or loans must be immediately available for access by the board to fund required repair, maintenance, or replacement expenses without further approval by the members of the association. A special assessment, a line of credit, or a loan secured under this sub-subparagraph and related details must be included in the annual financial statement required under s. 719.104(4) to be delivered to unit owners and required under s. 718.503 to be provided to prospective purchasers of a unit.

 

b. For a budget adopted on or before December 31, 2028, if

the association has completed a milestone inspection pursuant to s. 553.899 within the previous 2 calendar years, the board, upon the approval of a majority of the total voting interests of the association, may temporarily pause, for a period of no more than two consecutive annual budgets, reserve fund contributions or reduce the amount of reserve funding for the purpose of funding repairs recommended by the milestone inspection. This sub subparagraph does not apply to a developer-controlled association and an association in which the non-developer unit owners have been in control for less than 1 year. An association that has paused reserve contributions under this sub subparagraph must have a structural integrity reserve study performed before the continuation of reserve contributions in order to determine the association's reserve funding needs and to recommend a reserve funding plan.

• The bill provides for pooling of an association’s reserve accounts for two or more required components. 

• The bill also provides a vote of members is not required for the board o to change the accounting method for reserves to a pooling accounting. 

.        5. An association's reserve accounts may be pooled for two or more required components. Reserve funding for components identified in paragraph (g) may only be pooled with other components identified in paragraph (g). The reserve funding indicated in the proposed annual budget must be sufficient to ensure that available funds meet or exceed projected expenses for all components in the reserve pool based on the reserve funding plan or schedule of the most recent structural integrity reserve study. A vote of the members is not required for the board to change the accounting method for reserves to a pooling accounting method or a straight-line accounting method.

 

6. The division shall annually adjust for inflation, based on the Consumer Price Index for All Urban Consumers released in January of each year, the minimum $25,000 threshold amount for required reserves. By February 1, 2026, and annually thereafter, the division must conspicuously post on its website the inflation-adjusted minimum threshold amount for required reserves.

• Paragraph k(1) is amended to include habitable.

( k)    Structural integrity reserve study.-

1. A residential cooperative association must have a structural integrity reserve study completed at least every 10 years for each building on the cooperative property that is three habitable stories or higher in height, as determined by the division.

•  Paragraph k(1)h is amended to include

h. Any other item that has a deferred maintenance expense or replacement cost that exceeds $25,000 or the inflation­ adjusted amount determined by the division under subparagraph (j)6., whichever is greater, and the failure to replace or maintain such item negatively affects the items listed in sub-subparagraphs a.-g., as determined by the visual inspection portion of the structural integrity reserve study

.

Paragraph 3a. deletes the verbiage “may be performed by any person qualified to perform such study.   However,” and replaces it with “including” to read as follows:

a. A structural integrity reserve study, including the visual inspection portion of the structural integrity reserve study must be performed or verified by an architect, licensed contractor, or engineer

• The bill adds a new paragraph 3b. relating to design professionals, licensed contractors who must disclose their bids in writing and any other services that may be related to the maintenance repair or replacement.

(b) Any design  professional as defined ins. 558.002 or any contractor licensed under chapter 489 who bids to perform a structural integrity reserve study must disclose in writing to the association his or her intent to bid on any services related to any maintenance, repair, or replacement that may be recommended by the structural integrity reserve study. Any design professional as defined ins. 558.002 or contractor licensed under chapter 489 who submits a bid to the association for performing any services recommended by the structural integrity reserve study may not have an interest, directly or indirectly, in the firm or entity providing the association's structural integrity reserve study or be a relative of any person having a direct or indirect interest in such firm, unless such relationship is disclosed to the association in writing. As used in this section, the term "relative" means a relative  within the third degree of consanguinity by blood or marriage. A contract for services is voidable and terminates upon the association filing a written notice terminating the contract if the design professional or contractor failed to provide the written disclosure of the interests or relationships required under this paragraph. A design professional or licensed contractor may be subject to discipline under the applicable practice act for his or her profession for failure to provide the written disclosure of the interests or relationships required under this paragraph.

 

• The bill amends 4(a) to reflect that the structural integrity reserve study must visually include  each item and adds the following verbiage at the end of the paragraph 4

(a) At a minimum, the structural integrity reserve study must include a recommendation for a reserve funding schedule based on a baseline funding plan that provides a reserve funding goal in which the reserve funding for each budget year is sufficient to maintain the reserve cash balance above zero. The study may recommend other types of reserve funding schedules, provided that each recommended schedule is sufficient to meet the association's maintenance obligation.

 

The bill amends 4.b  by adding the following verbiage:

• If the structural integrity reserve study recommends reserves for any item for which reserves are not required under this paragraph, the amount of the recommended reserves for such item must be separately identified in the structural integrity reserve study as an item for which reserves are not required under this paragraph.

The bill adds a new 4.c.

c. The structural integrity reserve study must take into consideration the funding method or methods used by the association to fund its maintenance and reserve funding obligations through regular assessments, special assessments, lines of credit, or loans. If the structural integrity reserve study is performed before the association has approved a special assessment or secured a line of credit or a loan, the structural integrity reserve study must be updated to reflect the funding method selected by the association and its effect on the reserve funding schedule, including any anticipated change in the amount of regular assessments. The structural integrity reserve study may be updated to reflect any changes to the useful life of the reserve items after such items are repaired or replaced, and the effect such repair or replacement will have on the reserve funding schedule. The association must obtain an updated structural integrity reserve study before adopting any budget in which the reserve funding from regular assessments, special assessments, lines of credit, or loans does not align with the funding plan from the most recent version of the structural integrity reserve study.

• The bill amends paragraph 5 to reflect that four-family dwellings are not subject to the provisions included in paragraph 5.

• The bill inserts a new paragraph 9 which reads as follows:

 9. If the association completes a milestone inspection required by s. 553.899, or an inspection completed for a similar local requirement, the association may delay performance of a required structural integrity reserve study for no more than the 2 consecutive budget years immediately following the milestone inspection in order to allow the association to focus its financial resources on completing the repair and maintenance recommendations of the milestone inspection.

 

The bill adds a sentence to paragraph 10.

• An officer or a director of an association must sign an affidavit acknowledging receipt of the completed structural integrity reserve study.”

The bill adds a new paragraph 13.

13. The division shall adopt by rule the form for the structural integrity reserve study in coordination with the Florida Building Commission.

 

The bill amends the emergency powers of the board under s.719.128, F.S.

 

The bill amends the association's emergency powers by adding the term “mandatory” before an evacuation order in the locale in which the cooperative is located is located.  In addition, the bill deletes the term “should any” replacing it with the term “if a” unit owner or other occupant of a co-operative fails or refuses, the association is immune from liability or injury to persons or property arising from such failure or refusal.

 

The bill amends paragraph ( 2)(c) requiring that cooperatives shall create and maintain an online account with the division as required under subsection (3). EH for the new subsection eading:

(c) A cooperative association shall create and maintain an online account with the division, as required in subsection (3).

 

(3) On or before October 1, 2025, all cooperative associations shall create and maintain an online account with the division and provide information requested by the division in an electronic format determined by the division. The division shall adopt rules to implement this subsection. The division may require cooperative associations to provide such information no more than once per year, except that the division may require cooperative associations to update their contact information in paragraph (a) within 30 days after any change. The division shall provide a cooperative association at least a 45-day notice of any requirement to provide any required information after the cooperative association creates an online account. The information that the division may require associations to provide is limited to:

 

(a)  The contact information for the association that includes all of the following:

1. The name of the association.

2. The physical address of the cooperative property.

3. The mailing address and county of the association.

4.  The e-mail address and telephone number for the association.

5. The name and board title for each member of the association's board.

6. The name and contact information of the association's community association manager or community association management firm, if applicable

7. The hyperlink or website address of the association website, if applicable.

(b) The total number of buildings and for each building in the association:

 

The total number of stories of each building, including both habitable and uninhabitable stories.

1. The total number of units.

2. The age of each building based on the certificate of occupancy.

•   Any construction commenced on the common elements within the previous calendar year.

(a)  The association's assessments, including the:

1. Amount of assessment or special assessment by unit type, including reserves.

2. Purpose of the assessment or special assessment.

3. Name of the financial institution or institutions with which the association maintains accounts.

(b)  A copy of any structural integrity reserve study and any associated materials requested by the department. The association must provide such materials within 5 business days after such request, in a manner prescribed by the department.

 

The bill amends Section 24. Paragraph (d) of subsection (1) and paragraphs (c) and (d) of subsection (2) of section 719.503, Florida Statutes, are amended to read:

 

719.503 Disclosure prior to sale.­

(1) DEVELOPER DISCLOSURE -

• A contract that does not conform to the requirements of this paragraph is voidable at the option of the purchaser before closing.

LEGISLATIVE SESSION

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