Real Estate

Borrowing Money Secured by Real Estate

When borrowing money to acquire or refinance real property in Florida, the lender will prepare an entire loan package for you to sign at closing. The two main documents in the loan package are the promissory note and the mortgage. The promissory note creates the primary contractual obligation for you to repay the loan to the lender. Generally, the note will include things like the amount that you are borrowing, the term of the note, the interest rate being charged and the amount of your payments. You will want to look carefully at other provisions of the note that could impact repayment, such as late charges, default interest rate and prepayment provisions.

The mortgage secures repayment of the promissory note. It will be recorded in the public records of the county where your real property is located. The mortgage will typically have representations and warranties that you make to the lender regarding you and your ownership of the property. Additionally, the mortgage will have covenants with which you will be required to comply as long as your loan is outstanding. Typical mortgage covenants include things like maintaining the property, keeping the property insured and paying the real estate taxes. According to Florida law, a mortgage only grants a consensual lien on the real property in favor of your lender and is not deemed to be a conveyance of the legal title or the right of possession; however, the mortgage will also contain default provisions and what the lender’s remedies are in the event of a default. A typical remedy is judicial foreclosure of the lien, which could result in the lender ultimately owning your property if you do not repay the loan.

Promissory notes and mortgages are subject to documentary stamp taxes in Florida. These documents are taxed at a rate of 35 cents per $100, or any fraction thereof, of the amount of the indebtedness indicated in the document. Mortgages are typically also subject to a nonrecurring intangible tax imposed at the rate of 2 mills (.002) on each dollar secured by the mortgage. Note that some mortgages, such as those in favor of a credit union, are exempt from the intangible tax.

One of our experienced attorneys can help you with your loan questions, as well as closing your real estate transactions.

Real Estate

The Impact of Easements on Real Property

By: Kyle H. Jensen

A person interested in purchasing real property should always determine whether any easements burden or benefit the real property and the impact such easements have on the real property. An easement is a right held by a person to use another person’s real property, or portion thereof. Generally, easements provide non-owners with the right to have access over, run utilities through, or drain onto a portion of an owner’s real property. Easements can be granted to specific individuals or for the benefit of the owners of other real property not burdened by the easement. An easement burdens real property when the real property is subject to and restricted by the rights granted by the easement. An easement benefits real property when the real property and its owner are benefitted by and entitled to use the rights granted by the easement.

It is important for purchasers to determine if there are any easements that burden the real property they are interested in because such easements may restrict or even prohibit a purchaser’s intended use or development of the real property. If, for example, an access easement runs over a portion of the real property where the purchaser wants to construct a building, the purchaser would be prohibited from constructing such building because it would block the access easement rights granted to another party. There may be ways to work around the easement, such as relocating the easement area or constructing improvements that do not block the easement; however, a purchaser should always resolve these issues before closing to avoid purchasing real property that cannot be operated or developed for its intended use.

It is also important for prospective purchasers to determine if there are easements that benefit the real property they are interested in, or if they need to obtain a beneficial easement, especially when purchasing vacant property. If a purchaser is interested in real property that does not have access to a public road, then such purchaser must either confirm the real property is benefited by an access easement that provides the real property with sufficient access to a public road or require the seller to obtain an access easement. A purchaser should remember that even if the real property has access to a private road, there is no guaranty that the owner of the real property has the right to use such private road unless there is an easement that grants such rights. Furthermore, when purchasing vacant property, a purchaser should determine whether the real property has access to utilities, and, if not, require the seller to obtain utility easements from the adjacent real property to provide necessary access. Accordingly, purchasers should always carefully inspect all easements that burden or benefit the real property they intend to purchase. Failure to do so may result in purchasing real property that cannot be used or developed in the manner the purchaser intended.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Eminent Domain and Just Compensation

By: Zachary H. Brown

How does government acquire the land it uses to install utilities or construct new roads? It exercises an authority that is called eminent domain. Eminent domain allows the government to take private property if it is for a “public use.” The phrase “public use” is contentious since, depending on who is defining it, could greatly limit or increase the government’s authority to take private property. This article gives some background on what eminent domain is, and how property owners can either fight it or at least be fully compensated for it.

The Fifth Amendment to the United States Constitution, in part, reads that no person shall be “deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” Courts have usually deferred to what the legislature defines as “public use” rather than deciding for themselves. A generic definition of a public use is that the property does not have to be used by the public, but rather the property must be taken for a public purpose. Courts have ruled that this public purpose can be served through a governmental department, or even a private enterprise, and still satisfy the “public use” requirement.

Governments use eminent domain for a number of different reasons. Some are obvious, but others are somewhat surprising. Eminent domain is most commonly used when governments have to do things such as acquire land for roads, or build power lines, where the government is providing an important function to the local community. However, government will, in some cases, acquire downtrodden or “blighted” areas of the community and attempt to redevelop them in order to increase the economic and cultural output of those areas. Governments can do this because positive economic development is a good for the public, therefore the taking of private property is done for a public purpose.

As mentioned, government can only take property using eminent domain when it gives the property owner just compensation. What exactly is just compensation? Most people would say the fair market value of whatever land the government is trying to take. However, the question can be more difficult than that. What if the property has structures on it, connects one piece of the property owner’s land to another, or the taking negatively impacts the use of the remainder of their property? Florida law dictates that the answer to those questions is something that is decided by  a jury selected from citizens in the local community.

If a property owner feels that the compensation offered was not just, challenging the government can get expensive. That’s why the Florida Legislature has enacted a law that states the property owner has a right to reasonable attorney’s fees and appropriate expert costs for eminent domain proceedings in the Circuit Court. There are limits on this right, and courts have held that this right only extends to fees that are “incurred in the defense” of eminent domain proceedings. It is important to consult with an attorney before deciding if an eminent domain case is worth fighting in court.

Eminent domain is a powerful, but very necessary, tool the government uses to provide important functions for its constituents. However, it can be an infringement on private property owner’s rights unlike anything else the government does. If you become aware of or receive notice of an eminent domain action that may impact your property, it is important to consult with a local attorney about the rights and remedies that you may have.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Distinguishing Variances and Special Exceptions

By: Zachary H. Brown
Clark, Campbell, Lancaster & Munson, P.A.

There are many avenues that property owners could travel to get around certain restrictions that local governments impose upon property throughout their jurisdiction.  Sometimes local governments will restrict, for example, how high buildings can be built, or how property can be used.  Such restrictions play an important role in how local governments plan and zone our communities.  The most common tools that allow property owners to get around these restrictions are variances and special exceptions.

The primary difference between a variance and a special exception is that a variance grants a property owner the ability to use his or her property in a manner that is completely against local regulations, while a special exception is a circumstance that local governments specifically recognize before drafting a law, and will make provisions that recognize exceptions in the regulation itself.  Each tool comes with its own benefits and drawbacks, but after a brief explanation they may be slightly easier to understand for property owners seeking to develop their property.

A variance is granted only when a property owner shows an undue hardship created by unique circumstances that the property owner did not create.  The law is very clear that if the hardship is created by the property owner, a variance should not be granted.   For example, is a hardship self-created if you buy a piece of property expecting to put a gas station on it, but local zoning laws prohibit gas stations in that zone?  Florida courts have held in that situation, the hardship was self-created because that person knew of the zoning laws before buying the property, and thus created the hardship for himself.  In essence, ignorance of local laws does not create undue hardships for property owners.

Typically, variances can fall into two categories – use variances and area variances.  Use variances allow for property owners to use their property in a way not allowed by law, such as using your property in a zoning district that prohibits certain uses.  An area variance allows property to be developed in a way that violates some dimensional requirement imposed by local regulations.  This is most commonly found in height restrictions or setback requirements in local land development codes, where those restrictions limit development in such a way that development of the property is considered impossible.

Special exceptions are used by local governments when a particular use of the land is potentially problematic, but can be allowed if subjected to heightened development standards.  These are also frequently referred to as special use permits or conditional use permits.  Common examples of special exceptions are adding religious buildings or schools to local neighborhoods where residential property is the primary use.  Local governments will grant these requests, but likely only by requiring certain “conditions” be met prior to approval of the use.  There are a number of different conditions local governments can impose, but a few of them include landscaping features, parking upgrades, or right-of-way conveyances.

These are just a few common tools that are available for those property owners seeking to develop their property.  As always, the best course of action is to retain a local attorney to assist with this process.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Defect Disclosure Requirements for a Residential Sale

Historically, when real property was being bought and sold the doctrine of caveat emptor or “let the buyer beware” controlled. Under this doctrine, it was the buyer’s sole responsibility to determine if any defects were affecting the property and the seller had no obligation to bring such defects to the buyer’s attention.

Many jurisdictions, including Florida, have abandoned the doctrine of caveat emptor to an extent and have created a duty for sellers to disclose certain defects. In a Florida residential sale, where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. If the seller fails to disclose latent defects, then the buyer can bring a lawsuit against the seller for damages relating to any such defect.

Importantly, selling a house “as-is,” or including an “as is” clause in a residential sales contract does not excuse the seller’s duty to disclose latent defects. An “as-is” sale is a sale in which the seller has no obligations to make repairs to the property but the seller still must disclose any known latent defects.

When selling your home, it is important to make any disclosures regarding potential latent defects in writing. If you make disclosures regarding latent defects orally you may have difficulty proving at a later date that you made the disclosures. If a buyer then brings a lawsuit against you for failing to disclose a latent defect, you might not be in as strong a position as if you had made the disclosure in writing at the outset. As a best practice, when disclosing latent defects, do so in writing.

A seller is only responsible for disclosing latent defects which the seller has actual knowledge. A seller’s obligation to disclose latent defects does not turn the seller into a guarantor as to every condition of the house being defect-free. If a buyer purchases a home and discovers a latent defect, he or she will not be able to hold the seller liable unless the seller knew of the defect and the defect materially affects the value of the property. This protects sellers from being in the almost impossible position of being responsible for any latent defect in a home that becomes known to a buyer after the sale.

The Florida statutes make certain exceptions regarding disclosure of some latent defects which certain buyers may consider to be material. For example, a seller has no obligation to disclose that an occupant of the property is infected with HIV or AIDS; or that the property was the site of a homicide, suicide, or death.

If you have purchased a home and discovered a latent defect for which you believe the seller had actual knowledge and failed to disclose, you should promptly consult with an attorney to explore any legal options you might have. Similarly, if you are a seller who

has been contacted regarding a claimed latent defect in a house you sold, you should promptly contact an attorney to discuss your legal options.

Matt Kelly is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

To Survey or Not To Survey

By: Kyle Jensen, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Q: Should I obtain a survey for real property I am purchasing?

There are many issues a buyer must consider and pitfalls a buyer must avoid when purchasing real property, regardless of whether the buyer is acquiring a large commercial center or the buyer’s first home. Accordingly, an experienced buyer will thoroughly investigate prospective real property to determine whether such real property is suitable for the buyer’s intended purposes. One of the most important steps buyers often take when investigating real property is to obtain a survey.

A survey of real property is, in part, a depiction of the real property that portrays its boundary lines and dimensions and all of the improvements, easements, and other attributes located within the real property. The survey allows the buyer to, among other things, confirm the actual boundaries and dimensions of the real property, confirm none of the neighboring properties’ improvements encroach upon the real property, and confirm none of the improvements located on the real property encroach upon any easements or encroach into any adjacent property.

Once a survey is obtained, the buyer should thoroughly review the survey, with the assistance of a knowledgeable real estate attorney if possible, to determine there are no major defects on the real property, and that the real property is suitable for the buyer’s intended uses. For example, if a buyer purchases a residential home with the intention of constructing a porch on the back of the home, the buyer should confirm there are no easements or other encumbrances running behind the home that would prevent the buyer from constructing such porch; or if a buyer purchases a commercial property within a busy commercial center, the buyer should confirm none of the improvements located within the real property, such as the building sign, encroach upon the adjacent property.

The failure to obtain, or thoroughly inspect, a survey of real property can cause significant problems for the buyer after closing. In the examples above, the buyer of the residential property may be prohibited from constructing a porch in his or her back yard because the buyer failed to discover a utility easement in favor of a local utility company running behind the home; or the buyer of the commercial property may be required to demolish and rebuild its sign because it failed to discover the sign was actually located on adjacent property.

Therefore, while it may be tempting for a buyer to forego obtaining a survey in an attempt to save money, failure to obtain a survey can actually cost a buyer money in the long run, and, in the most severe of situations, may result in the buyer being unable to utilize the real property for the buyer’s intended purposes.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

The Basics Surrounding Homeowners Association Turnovers.

By: Dan Rich, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

One of the most important events a homeowners association will face is its “turnover” or “transition” from the developer of the community to the unit owners. Despite the importance of a turnover, what I’ve found is that many unit owners are unaware of the basics surrounding a homeowners association’s transition. This article is intended to serve as an overview of the transition process for homeowners associations and developers that may be undergoing the process, are on the verge of a transition, or who just want to educate themselves on what a proper turnover entails.

“Transition” or “turnover” of any homeowners association means that the unit owners of the association, as opposed to the developer, are now entitled to elect at least a majority of the members of the association’s board of directors. This is a huge step for any association, as the board of directors, or board, serve as the voice of all unit owners while also conducting the day-to-day affairs of the association. For homeowners associations, the turnover process is governed by Section 720.307, Florida Statutes. Section 720.307 provides that a turnover is triggered upon any one of the following six events occurring:

  1. Ninety percent (90%) of the parcels in all phases of the association have been purchased, in which case turnover must occur within three (3) months of the developer reaching the 90% sale threshold;
  2. Some other percentage of parcels have been purchased, a certain “triggering” event has occurred, or a specified date has been reached, as particularly specified in the association’s governing documents;
  3. The developer abandons its responsibilities to maintain and complete the amenities or infrastructure as disclosed in the association’s governing documents;
  4. The developer files for Chapter 7 bankruptcy;
  5. The developer loses title to the association property via foreclosure or a deed in lieu of foreclosure, unless the subsequent owner has accepted an assignment of the developer’s rights and responsibilities; and
  6. A receiver is appointed by a circuit court judge for longer than thirty (30) days, unless the court determines that the transfer of control would be detrimental to the homeowners association;

Upon the occurrence of any of the above triggering events, unit owners, other than the developer, are legally entitled to elect at least a majority of the association’s board. However, so long as the developer is still holding for sale at least five percent (5%) of the association’s parcels, the developer remains entitled to elect at least one member onto the association’s board.

Section 720.307 goes on to provide that once unit owners have had the association turned over to them, the developer must also “turnover” all of the association’s documents to the association. These documents include, but are not limited to, the original recorded declaration of covenants, a certified copy of the association’s articles of incorporation, a copy of the bylaws, the minute books, financial records (more on this below), bank accounts and statements, personal property of the association (i.e. indoor and outdoor furniture, office equipment, computers), and all of the construction plans and specifications, which must include a list of the names, addresses and telephone numbers of all contractors, sub-contractors, or others in the current employ of the association. The developer is also required to provide unit owners with copies of all insurance policies, certificates of occupancy, permits, warranties, unit owner roster, and all of the contracts that the developer controlled association may have executed for services such as cable, telephone, security and other services.

Importantly, for all homeowners associations incorporated after December 31, 2007, the financial records that the developer must provide to the unit owner controlled association must be audited by a certified public accountant. Additionally, the audit must cover the time from incorporation up and until turnover, or the time span from the most recent audit to turnover, if an audit has been performed for each year since inception. The purpose of these stringent audit requirements is to allow the unit owner controlled association to determine whether all expenditures were made for association purposes, and to also determine if the billings, cash receipts and related records reflect whether the developer was charged, and in turn paid, the proper amount of assessments.

Hopefully this step-by-step analysis will help prepare developers and unit owners facing a “transition” or “turnover” of their association. However, if the procedures – as outlined above – are not followed properly, it can result in expensive legal exposure that ultimately could have adverse effects for the association, its finances, and its unit owners. This is why you, as a developer or interested unit owner, or your association, should strongly consider consulting an attorney who is knowledgeable in Florida community association law for guidance on the appropriate turnover procedure for your specific association.

Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Enforcing community association rules by imposing fines.

By Dan Rich

One of the most common challenges for community associations is how to effectively enforce association rules against residents who repeatedly violate them. To start, it is important that the rules and regulations, as set forth in a community’s governing documents, be enforced consistently for each and every member, director, officer and resident or else the rules may be rendered unenforceable over time. If a community is faced with a repeat violator who has no intent of complying with the community’s rules, one of the most effective tools an association can use is to impose fines against the violator.
As of 2015, Florida law allows both homeowners and condominium associations to impose fines against members, tenants, guests and invitees who violate a community’s declaration of covenants, articles of incorporation, bylaws or any rules adopted by the association. For both homeowners and condominium associations, Florida statutory law provides that fines may not exceed $100.00 per violation, and that the fines may be imposed for each day that a violation continues, with the statutory mandate that fines cannot exceed $1,000.00, in total, per violation.

It is imperative that an association follow the statutory procedures as they are specifically outlined in Chapters 719 and 720, in order to impose fines at a later date. The steps necessary for imposing a fine are summarized below:

  • Step One. Establish a fining committee: An association’s board of directors must appoint an independent committee, often called the “fining committee” or “compliance committee” as its first step towards imposing fines. Fining committee members cannot be officers, directors, or employees of the association, nor can they be a spouse, parent, child, brother or sister of an officer, director or employee. The homeowner association statute requires a minimum of three (3) committee members, and the condominium association statute is silent as to the required number of committee members; however, selecting an odd number is often encouraged to avoid ties and unnecessary deadlock.
  • Step Two. Place violator on notice: After establishing the fining committee, and upon the occurrence of a violation, the association’s board of directors may place the violating resident (owners and tenants alike) on notice of the violation. Often times, it is most practical to send a courtesy notice warning the resident of their violation. Courtesy notices should contain the nature of the violation, the rule or regulation being violated, and provide a reasonable time frame to remedy the violation. If the violation remains uncured, the association is permitted to impose a fine; however, the violator must be provided with an additional notice, before the fine can take effect, stating that the violator has fourteen (14) days to request a hearing in front of the fining committee to dispute the validity of the fine before it is imposed.
  • Step Three. Fining committee hearing: If the violator requests the hearing mentioned in Step Two above, he or she is afforded an opportunity to appear in front of the fining committee to dispute the validity of the fine being imposed against the violator. The fining committee then has two options: (i) impose the fine levied by the association’s board; or (ii) overturn the fine – at which point the matter ends and the fine is no longer actionable. If the violator fails to request a hearing, for any reason, the fine can be imposed immediately at the end of the fourteen (14) day period.
  • Step Four: Collect the fine. If the fine is approved by the fining committee, the minutes from the meeting should be provided to the association’s board so that they can impose the fine. Typically, the fine is placed onto an invoice and transmitted directly to the violator. As stated previously, fines cannot exceed $100.00 per violation, but can be assessed against the violator for each day that the violation continues until the aggregate amount reaches $1,000.00. Only one fourteen (14) day notice and one opportunity for a fining committee hearing is required, thus, subsequent notices or hearings for the same fineable violation are not necessary. The association laws differ on how a maximum fine can be collected. In homeowners associations, the law provides that once the maximum fine is reached a lien can be recorded against the violator. However, for condominiums, the right to lien is absent. As such, the condominium association must pursue a collection action using the courts, or await a sale and then recoup the amount of delinquent funds at that time.

Hopefully, this step-by-step analysis will help association’s better address compliance and enforcement issues. However, if the process – as outlined above – is not followed properly, it can result in expensive legal exposure that ultimately could invalidate the fine. In fact, if a fine is challenged in court, the opposing counsel will first attack the association’s process in an attempt to invalidate the fine. This is why if you or your association should strongly consider consulting an attorney who is knowledgeable in Florida community association law for guidance.

Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Wrap-Up of 2018 Legislative Changes for Community Associations

By Dan Rich

On March 23, 2018, Governor Rick Scott signed House Bill 841 into law. House Bill 841, which shall take effect on July 1, 2018, makes numerous alterations to a number of statutes regulating certain community associations (i.e. cooperatives, condominiums and homeowners associations; however, House Bill 841 does not amend Chapter 723, which relates to mobile home parks). Below are some of the highlights of House Bill 841:

Fines and Suspensions: A fine approved by the fining committee of a homeowner, condominium or cooperative association is due five (5) days after the date of said committee meeting at which the fine was approved. Sections 718.303(3)(b), 719.303(3)(b) and 720.305(2)(b), Florida Statutes. If the fine is not paid after the five (5) days said fine can be assessed for each day the violator continues to not comply with the association’s governing documents. Once the fine reaches a total of one thousand dollars ($1,000), the association can then proceed to place a lien on the violator’s property in accordance with Florida law.

Notice of Meetings: A homeowners association, or HOA, is allowed to give notice by email to any parcel owner who has previously provided written consent and an email address to the HOA for the purpose of receiving notices. Section 720.303(2)(c)1., Florida Statutes. Condominium and cooperative associations were previously permitted to do so.

Official Records: A condominium association must permanently maintain the following documents since inception of the association (as opposed to the general requirement of seven (7) years of retention): (i) a copy of the articles of incorporation, declaration of covenants, bylaws and rules and regulations, if any, of the association; (ii) meeting minutes; and (iii) a copy of all plans, permits, warranties and other items provided by the developer at turnover. Section 718.111(12), Florida Statutes.

Board Member Communication: Members of the board of directors for cooperative associations and HOAs are permitted to utilize email as a means of communication; but, a director may not cast a vote on an association matter via email. Sections 719.106(1)(c) and 720.303(2)(a), Florida Statutes.

Term Limits: The provision that a condominium board member may not serve more than four consecutive 2-year terms was repealed by House Bill 841. Now, condominium board members may not serve more than eight (8) consecutive years, unless approved by a two-thirds (2/3) vote of unit owners or there are not enough eligible candidates to fill said vacancy. Section 718.112(2)(d)2., Florida Statutes.

Electric Vehicles: Condominium associations are now permitted to authorize the installation of charging stations for electric vehicles in limited common element parking spaces at the expense of the unit owner to which the parking space is assigned. Additionally, condominium associations may not prohibit unit owners from installing electric vehicle charging stations within limited common element parking spaces, provided that such installations must comply with Section 718.113(8), Florida Statutes.

HOA Elections: If an election is not required by the association’s by-laws because there are fewer or an equal number of candidates than the number of vacancies on the board to be filled, and nominations from the floor are not mandated by the association’s by-laws, then write-in nominations are not permitted and the candidates will commence service on the board regardless of whether a quorum is attained at the meeting in which the directors are elected. Section 720.306(9)(a), Florida Statutes.

Modifications: If a condominium declaration does not outline a procedure to approve material alterations to condominium property, then approval by seventy-five percent (75%) of the voting interests must be obtained prior to the material alterations to the property may begin. Section 718.113(2), Florida Statutes.

In addition to the provisions highlighted above, House Bill 841 contains other changes to Florida’s community association statutes.  Persons who reside or own property within a homeowners, condominium or cooperative association should take time to review House Bill 841. The full text of this Bill is available for free on the Florida Legislature’s website (Link: https://www.flsenate.gov/Session/Bill/2018/00841).  If you have questions about the new laws or how they may impact you or your community, you should consider consulting an attorney who is knowledgeable in Florida community association law for guidance.

Real Estate

What happens when nobody wants to serve on an association’s board of directors?

By. Dan Rich

Serving on a homeowner association, or HOA, board of directors is a thankless job that often fails to receive the recognition it rightfully deserves. Sadly, communities sometimes experience a dilemma where the old board members have served to their term limit and no other volunteers are interested in stepping up to the plate to volunteer their time and effort as a replacement board member. This creates two legal issues, the first is whether the old “termed out” board members can stay on the board as well as what happens if nobody is willing to serve on the HOA board moving forward.

Under Florida law, HOA directors are entitled to serve for their term and until their successor is duly elected (Emphasis added). Essentially, what this means is that if no new directors are willing to volunteer Florida law permits those people who are already on the board to continue to serve until a replacement steps forward to take their position. With that being said, you may be asking yourself whether that means that an existing board member is ever able to resign or step down from their position as a board member? The answer is yes, any board member at any time can express their intent to resign as a director and/or an officer but said resignation may not be without consequences because a HOA board needs officers and a quorum to conduct day-to-day business.

The definition of a “quorum” will change depending on the language of your governing documents, but the most common quorum definition is generally fifty-one percent (51%) director participation. For example, if an association is made up of a five-member board, a quorum would only be established after three of the board members decided to act. Failure to have enough directors to meet the definition of a quorum under your governing documents will prevent the HOA from being able to hold meetings and conduct meaningful business; however, resignations can also have a grave impact if the person stepping down is not only a director, but also an officer.

Officers of the board include the President, Secretary, Treasurer and sometimes Vice-President. The roles and duties of those offices are generally outlined in your association’s governing documents and provide each officer with certain abilities and powers. If a director, who is also an officer, decides to resign from the board not only will said resignation impact the ability to establish a quorum, but the vacancy may also impact the association’s ability to sign checks to pay third parties, access the HOA’s bank account or to enter into contracts with vendors and other providers.

Up to this point all scenarios have assumed that at least one director is willing to serve on the board, but what happens when all directors have resigned and nobody is willing to replace them? Section 720.3053, Florida Statutes, provides that “if an association fails to fill vacancies on the board of directors sufficient to constitute a quorum in accordance with the bylaws, any member may give notice of the member’s intent to apply to the circuit court within whose jurisdiction the association lies for the appointment of a receiver to manage the affairs of the association.”

There is a particular form for the notice, which is provided in Section 720.3053, that states that the petition to the court will not be filed if the necessary vacancies to establish a quorum are filled with thirty (30) days after the notice is posted or transmitted to all owners. The Florida legislature added this provision in hopes that the notice will conjure up enough volunteers willing to serve on the board to prevent the appointment of a receiver. If the 30 day window expires and nobody steps forward, the member who transmitted the notice can then petition the court for a receiver to run the association.

Unlike customary directors who take the position without compensation, Section 720.3053, provides that the receiver is entitled to receive a salary and reimbursement of all costs and attorneys’ fees payable from association funds. It also goes on to say that the “association shall be responsible for the salary of the receiver, court costs and attorneys’ fees.”

The difference between “free” volunteer directors and paid receivers with their accompanying fees can be a large number that has a drastic impact on the reserves of an HOA. Monies reserved for common area maintenance, repairs and just general upkeep could be directed to pay the receiver’s salary to run your community. Using association funds to pay a receiver is never a good idea as funds being diverted away from general upkeep and repairs will inevitably take a visible toll on your community. To prevent receivership from happening, I would encourage everyone who lives in a HOA and is even slightly pondering volunteering as a director to strongly consider stepping up and serving as a director the next time your community has an election. Your participation may have a greater impact than you ever realized before!

Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.