Condominium Accountability - We Need to Improve the Condominium Act

 Here is a proposal for an amendment to the Condominium Act that I will be requesting Republican legislators to introduce and pass. Please let me know what you think about it. Suggestions to improve it will be greatly appreciated.

Condominium Affordability and Accountability Act (Proposal for Legislative Bill)

Purpose: Make condominiums more affordable by improving the accountability of Association boards as well as licensed professionals advising them and allowing residents to opt out of paying for recreational benefits and any other costs not specifically related to building and property maintenance.

 

Provisions:

All master community organizations with the authority to assess fees to condominium associations or owners within them without explicit consent from every unit owner will be governed by provisions of the Condominium Act except when that creates a conflict with other laws they operate under. Conflict does not apply when stricter standards can be met to comply  with both sets of laws; both laws must be followed in that case. A conflict exists only when following one law will require another law to be violated. In cases where the Condominium Act requires more disclosure of information than required by other laws, the disclosure requirements of the Condominium Act will be in effect for any private organization allowed to impose fees or assessments on any Condominium Association, Condominium, or individual condominium owners without the explicit unanimous consent of all of the unit owners.

All activities of a recreational nature other than walking and bicycle paths through a neighborhood shall be spun off to a private, for-profit corporation with shares of stock issued to unit owners on the basis they paid for these activities over the last 5 years whether it be per unit, per resident, square footage of residence, or some other specified method. This will be in effect for Condominiums, Condominium Associations, and all Master Community organizations that can impose fees or assessments on Condominium Associations or condominium unit owners without explicit unanimous consent of the owners. These for-profit corporations will take ownership of the recreational properties including all landscaping, roads, parking lots, walkways, bike paths, and other facilities in the vicinity of the recreational facilities as well as  applicable reserve funds. Ownership of any pathways, walkways, or roads used by residents to get to or from their units from outside the community or directly from one residential building to another will not be transferred and will remain the property of the Condominium or its association regardless of proximity to recreational areas, but the private, non-profit corporation may be assessed fees by the Master Ownership board or an association board as applicable.

Nobody serving on the board of a condominium association may serve on the board of a condominium recreation corporation or vice versa without at least one year separating service on one type of board before assuming office on the other type of board. Violation of this is considered to be creating a conflict of interest and will make any violator ineligible to serve on any corporate board of a Florida corporation except an S corporation which the violator fully owns. This will be a civil offense, but any association board member or officer or a licensed professional such as a property manager, certified public accountant, or lawyer who allows or facilitates such a person being on a board will be guilty of a misdemeanor and subject to professional license suspension for a minimum of one year and permanent suspension from serving on a Florida condominium board. A lawyer acting as personal counsel for a board member who is prohibited from serving on a board is not subject to prosecution or license suspension unless that lawyer has been an attorney for the board of the organization involved during the past one year or provides legal advice to that board within one year after all legal conflict and litigation have been settled regarding the violator serving on a corporate board. In no case may corporate or association funds be used to provide legal representation of a person attempting to gain or preserve membership on a board in violation of this provision.

Funds obtained by assessments or maintenance fees on condominium owners or condominiums or condominium associations may not be used to subsidize in any way the expenses of the for-profit corporations created to own and manage the recreation areas. Any personnel and equipment used by both a condominium and the recreation corporation will be assumed to be costs of the recreation corporation to avoid using assessments to subsidize recreation activities. Violation of this provision is a criminal offense punishable as fraud, embezzlement, and larceny. Rental or use fees charged by a Recreation Corporation to a Condominium that are demonstrably less than prevailing rates within 5 miles of the Condominium for similar space are permitted if the rates are documented, but any condominium resident may submit a lower rate which applies based on their own cost assessment. The lower rate will apply unless the Recreation Area Corporate board successfully brings a civil legal action to have that rate challenged.

No expenses other than those related to maintaining the buildings and grounds of a condominium may be paid for with assessments. All fees for other services such as internet, cable, telecommunications, food, club houses, pools, mobility services, and any others not related directly to building and grounds maintenance must be opted into by an owner and such expenses may not be financed through required assessments. They must be financed only through voluntary payments collected from those who choose to pay for the particular service or services being offered. Violation by a board or property management company on behalf of a board shall be considered fraud and larceny. Any attorney providing an opinion to a board or property management company supporting or encouraging violation of this provision shall be subject to prosecution for fraud and larceny as an accomplice to the crime.

All multi-condominium associations are required to provide separate balance sheets and income and expense statements for each condominium on at least a quarterly basis and whenever reports are provided to board members or unit owners. Condominium budgets and financial statements must conform to generally accepted accounting principles including showing payment of debt principle and increasing debt by borrowing as adjustments to equity rather than expense or income.

If a condominium collects fees based on more than one factor such as unit square footage and per owned unit, then the amounts collected for and spent on items must be from a separate pool of funds designated for that type of cost allocation, assessment collection, and expense.  This applies to both operating costs and reserve funding.

On balance sheets for condominiums and condominium associations, the liability for reserves must be calculated using a straight-line depreciation method based on replacement cost, expected life of the capital item, and current age of the capital item. The assets will reflect the amounts actually in the reserve accounts. Simply using the assets in the reserves as the liabilities will constitute filing a false financial statement under both civil and criminal law. The equity of reserve funds will be reported for each category of reserve fund as well as for all reserve funds combined.

In multi-condominium associations, interest earned on cash balances, bank deposits, and investments shall be credited to each individual condominium in proportion to its cash balance in each account during the earning period. Unless average daily balance is used to compute cash balances, the earning period must not exceed one month and the method of balance calculation must either be the starting balance, ending balance, or average of the starting and ending balance. The method used cannot be changed more often than once per year. This shall apply to operating funds and reserve funds. For reserve and operating funds with funding separate from the condominiums for common areas and common expenses, their cash balances shall be treated as a separate condominium for purposes of allocating interest and other investment earnings. The balances of common accounts will be allocated as appropriate to individual condominiums for financial reporting purposes. Interest reallocations must be done for the three years prior to enactment of this law to correct previously made improper allocations of interest earnings.

Use of reserve funds to pay for operating expenses or the use of one condominium’s cash to finance another condominium’s expenses is a criminal violation of embezzlement and larceny laws. Any person, including an attorney, ordering, authorizing, or facilitating such an action will be in violation and subject to criminal prosecution as a violator or accomplice.

All audits of condominium finances by a certified public accountant must verify that all provisions of the Condominium Act are being followed regarding accounting for funds and financial reporting. All reporting of previous year financial numbers must be reported using the same format and categorizations as the year being audited in addition to how they were previously reported if there is any difference in reporting methodologies. Any deficiencies found by auditors must be reported to the Department of Business and Professional Regulation within 30 days of concluding the audit. Any deficiencies not corrected within 60 days must also be reported to the State Attorney for criminal prosecution. Failure of certified public accountants to meet reporting requirements will create a rebuttable presumption of acting as an accomplice to the violations of law. Failure to document and report existing condominium practices in violation of the law will require a minimum three month suspension of the license of the certified public accountant or accountants who sign off on the accuracy of the audit report regardless of whether they are criminally prosecuted.

All investigations of violations of the Condominium Act or investigation of licensed professionals regarding work done on behalf of an organization subject to the Condominium Act in response to a civil complaint whether probable cause is found or not shall be public records available to whoever files a complaint, or if the complaint is filed by a person acting as a government official or is a licensed professional fulfilling reporting requirements mandated by statute, to any member of the public.