The Laws Pertaining To Condos And HOAs Must Be Reformed

The main objective of the proposed reform is to achieve that the communities and the management of their funds are properly handled.

Edda Pujadas

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The most important points of the proposed reform to the Condominium and Homeowners Association Laws are that the board members attain academic preparation, that the reserve funds are duly maintained, and that there is transparency from the management to ensure good use of the resources to avoid fraud and abuse of power.

Senator Ana María Rodriguez, representing District 39, is one of the main voices promoting these reforms. Rodriguez, who has been involved in the real estate and condominium associations sector for more than eleven years, states that the collapse of the Surfside condo has brought this issue to light.

“The reform that I am proposing is based in three main issues, the first one verses around the mandatory education of the board members of condominiums and homeowner associations. They are the persons that will be determining priorities, that will approve budgets and will manage the buildings and communities, for this reason, they need to be prepared to hold these responsibilities.”

Rodriguez believes that the board members of associations and condominiums should have the same instruction that a Community Association Manager has. This will prepare them for their managerial, financial, and legal responsibilities. If this change is approved, Florida will be the first and only state that requires that the board members get educated this way.

The second aspect that is being highlighted by Rodriguez is the creation of a database in the Department of Business and Professional Regulation (DBPR). This database would contain all the information regarding associations and condominiums, including the names of the board of directors, documents, rules and regulations of the communities, approved budgets, and any special assessment if they exist. “All of this information must be public record.”

Financial transparency and avoiding fraud are also a priority for Senator Ana Maria Rodriguez. The third fundamental aspect of her proposal is to achieve that the DBPR gets more power over the associations and condominiums and can make them comply with the law.

The DBPR is a mere administrative entity; it is in charge of granting licenses and regulating businesses and professionals in the State of Florida. “Ideally, the DBPR (initially in Miami Dade, Broward, and Monroe Counties) would be able to investigate cases, impose sanctions and fines, and have the power to make the law be respected.”

MANDATORY RESERVES?

Even when the possibility of homeowner associations and condominiums having mandatory reserves is not one of the proposals of Senator Rodriguez, this in another of the issues that is being analyzed as one of the reforms, and one that causes the most controversy. It directly affects the finances of each one of the homeowners, together with the decision-making of new buyers.

The reality is that all buildings deteriorate with time, and for this reason, associations must reserve funds in a consistent way to mitigate and remediate any structural situation that might require attention. The condominium board of directors must keep the rest of the owners informed about all the structural and safety needs and prioritize these over the aesthetic renovations.

If the above situations require an increase in the monthly maintenance fee or the imposition of special assessments throughout the years, these adjustments must be considered as necessary so that the property does not lose its value and to keep the residents safe. This is not easy to understand for those that are paying the increase.

They are very few residents that attend the condominium meetings. When there is the need to present a proposed monthly increase or any special assessment, there are multiple financial conflicts that arise, and these are difficult to deal with because no one wants to pay more.

The idea behind this reform is to help the owners understand the importance to save money for future repairs and maintenance of the buildings and the community. The idea is to increase the maintenance fee gradually, trying to build reserves up to 3% of the annual budget and keep on increasing them until they reach 10%, which will, at the same time build financial stability and better options to get good insurance.

Nowadays, the insurance industry is less willing to underwrite insurance for condominiums and homeowner associations with affordable premiums and reasonable deductibles because these are considered high risk clients. To keep the premiums at low costs, a lot of the boards of directors chose to buy insurance with low coverage and high deductibles, because with this, any excess in the costs becomes the obligation of the owners.

A reserve fund is designed to finance the maintenance, repair, and replacement of the main components of a complex due to normal wear and tear. Keeping the condominiums and homeowner associations in good shape will allow the board to get better and more affordable insurance policies.

A lot of owners are opposed to reserve funds, but not just because of whether or not they can afford them. Most of the owners of houses or condominiums simply do not trust their board of directors. They do not believe that they are able to safeguard these funds and they are afraid that their collective funds will be spent in the future in projects that are not important.

Under this optic, the proposal of Senator Rodriguez becomes more relevant, because the best way to generate trust among the owners is by eliminating possible conflicts of interests in the management of these communities. This could be achieved by having all registries become public and controlled by the DBPR.