Tag Archives: 718.111

Florida Statute 718.111(12): Unit Owner Access to Florida Condominium Association Official Records

Posted on March 8, 2014 | 57 Comments

A reader recently asked how frequently a unit owner has a right to view the official records. In this person’s case there was a unit owner requesting official record documents on a weekly basis. This question prompted the following post on unit owner official records access.

Every Florida condominium association is required by law to maintain official records. An overview of what constitutes official records is provided here with a more detailed overview of financial records here. Florida Statutes 718.111(12)(b) and 718.111(12)(c) provide unit owners the right to view and make copies of official records; however, aside from very basic guidelines, the association remains responsible for creating reasonable rules surrounding the frequency, time, location, notice and manner of unit owner record inspections. Because associations are left to construct official record inspection rules, I recommend (as I always do) that the board create and distribute a policy around official records access. In general, it is my opinion that the more official records transparency the better; is a great way to earn unit owner trust.

This post will review the access provisions laid out in the Florida Statutes and provide general guidelines on constructing a reasonable official records access policy.

Florida Statute Guidelines

  • Official records must be maintained within the state for 7 years
  • Official records must be made available within 5 days of a unit owner’s written request
  • Official records must be available to unit owners within the condo’s county (or within 45 miles if the county boarder is more than 45 miles from the condominium)
  • Official records must be open to inspection at reasonable times
  • Associations may charge a reasonable expense for copies of official records
  • Associations may approve reasonable rules surrounding frequency, time, location, notice & manner of inspections
  • Unit owners who are denied access to the official records 10+ days after a written request are eligible for damages no lesser than $50 per day and reimbursement of any attorney’s fees.
  • Unit owners may take photos of official records with a camera, phone or other electronic device.
  • The association must maintain copies of the declaration, articles of incorporation, bylaws, rules & regulations, frequently asked question & answer sheet and most recent year-end financial report on the condominium property for unit owners and prospective purchasers. The association may charge its actual costs of preparing these documents.
  • The following documents are protected and NOT available to unit owners: (1) documents protected by lawyer-client privilege; (2) information associated with the sale of a unit; (3) homeowner medical records and other confidential information such as Social Security Numbers; (4) association security information (e.g., passwords); and (5) personnel records (if the association has employees).

NOTE: Personnel records include items such as the health records, W-4s and performance reviews. This records exemption does not include salary details of the employee as this information should be readily available in the association’s budget.

 

Official Records Storage

Before an association can establish reasonable rules around unit owner access to official records, the board must have a good handle on how/ where official records are stored. Associations that are self-managed or in-house managed have much more control over the storage of their official records than do professionally managed associations. As I discussed in length in my post on management transitions, I strongly recommend that boards of professionally managed associations complete official records “audits” from time to time to ensure proper records maintenance. I also recommend that boards provide guidelines to their management companies on how they would like their records organized and stored. Here are a few recommendations:

  1. If the association has an on-site office or lobby, consider keeping a computer with all official records on it for unit owners to review at any time.
  2. If the association has a website, keep the association’s key records (e.g., financial statements, meeting minutes, agendas, budgets, reserve studies, insurance information) on the website for unit owners to access at their convenience. This also provides a web-based backup of the official records so there is no concern about them being destroyed due to theft or natural disaster.
  3. Keep binders with hard copies of all frequently requested records on property or at the manager’s office. A simple way to do this is to have a binder for each key item.
  4. Store any hard copy records that will be accessed infrequently (e.g., copies of checks, invoices from prior years) in a professional storage facility designed to withstand hurricane force winds.

 

Official Records Access Policy

Given that the Florida Statutes provide associations with the flexibility to create reasonable rules surrounding official records access, I believe establishing a policy is prudent in that it specifically informs management how to proceed and ensures consistent unit owner treatment. Of course, if your association has its official records readily available on property or electronically for unit owner viewing at their convenience, the majority of this policy becomes irrelevant. If unit owners in your community are frequently asking for official records documents and your records are primarily in hard copy, it may be worth contracting to have all of your records scanned and made available via the web. From personal experience, the time saved by directing every official records request to one website is well worth the upfront cost.

I would recommend that every official records access policy include the following:

Governing Documents, FAQ Sheet & Year-end Financial Report: While the Florida Statutes specifically say “copies” of these documents must be available on property, the association should focus instead on compliance with the spirit of the law. If the association would like to keep paper copies of these documents on property, that’s great. If that doesn’t make sense for your association, I believe the following options also comply with the law: (1) making the documents available on a website, (2) making them available on a CD/ thumb drive, (3) emailing them to the requestor.

 The policy should specify how these documents will be provided to unit owners/ potential buyers and any costs associated with these documents. The law specifically states the association may charge actual costs of these documents. If they are available via website or email, there should be no charge. If available via hard copy, CD, or thumb drive, the association should charge whatever amount the manager or document preparation services (e.g., Kinkos) charges the association. For self-managed associations completing printing work in-house, a cost of $.10 – $.15 per page for black and white or $.50 for color is reasonable. This range should cover your paper, ink and printer wear and tear. If creating CDs or thumb drives in-house, the cost should reflect the actual cost of the CD or thumb drive.

 Copying Fees: For official records excluded from #1, the association may charge a reasonable fee for copies, CDs or thumb drives of these records. I don’t see this as much different than actual cost given that it seems unreasonable for the association to make a profit (even if a small one) on official record distribution. As mentioned above, unit owners should charge the exact cost charged to them by the manager or other professional preparing the records. For self-managed associations, the cost guidelines mentioned in #1 remain reasonable though the association may charge an additional amount for time spent making copies so long as the amount is defendable.

 Viewing Location:  The policy should specify where unit owners may view the records. There may be multiple locations. For example, meeting minutes, budgets and monthly financials may be available on the association’s website while copies of contracts and invoices are available at the management company’s office.

 Frequency of Requests:  The policy should specify how frequently a unit owner may request records and clarify that any requests in excess of the frequency limitations will not be accepted. There is no right choice: daily may be too burdensome on the association but quarterly may be too limiting for the unit owner. It may be worthwhile here to distinguish between how frequently a unit owner may request electronic records (i.e., those that can be easily emailed) and how frequently they may request viewing of hard copy records.  These specifics will entirely depend on how your property is managed and how records are stored.

Viewing Times: The policy should specify when documents are available for review. For those available on the web, there is no limitation on viewing time. For all other documents, viewing times may be by appointment during the management company’s business hours.

Making a Request: This section should indicate how the unit owner makes a request. It should specify who the unit owner contacts and what information to provide. I would recommend associations require unit owners to select specific records or groups of records (e.g., 2009-2011 budgets, March 13, 2013 invoice from Joe Plumber). This avoids the “I’d like to see all your records” requests which are nearly impossible to accommodate. Generally these requests arise if a unit owner feels the association is hiding something. All requests should be in writing (mail or email). The policy may also require the unit owner to provide his/ her availability over coming days (if applicable).

Request Response: This section should indicate how and when the association will respond. The law states that documents must be made available within 5 days of a written request. Do not read this to mean that in all circumstances the documents must be in the hands of the requestor within 5 days. If the association has the requested documents available electronically, they should certainly be emailed within 5 days. However, for hard copy documents, the association should respond as promptly as possible (I’d recommend within 1 business day) and offer reasonable viewing time(s) that fall within the 5 days window.

 

As I recommend with all policies, the association’s attorney should review the policy before it is finalized. Further, the board should re-review and re-approve the policy annually to ensure continued compliance with applicable law.

Feel free to reach out with any questions.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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Florida Condominium Association Board Members Voting By Proxy

Posted on January 29, 2014 | 14 Comments

I recently received a question asking if Board members have the right to vote by proxy. The Board member that posed this question was going to be out of town for an important Board meeting and wanted to know if he could give another Board member a general proxy to vote on his behalf.

According to Florida Statute 718.111(1)(b), Board members may not vote by proxy. Further, Board members not present at a meeting may not provide a vote in writing. The only real option for a Board member that is not physically at the meeting location is to vote via phone or webcam. Florida Statute 718.111(2)(b)(5) requires that Board members joining a meeting via phone must be put on speaker such that all meeting attendees can hear the Board member.

If an absentee Board member is only interested in one particular agenda item, there is nothing prohibiting the Board member from calling into the meeting for that vote only so long as a quorum of the Board is otherwise met.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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Water Leaks in Florida Condominiums: Association Responsibilities and Cost Reduction Strategies

Posted on October 28, 2013 | 202 Comments

Leaks are common in condominiums and are a constant headache for associations. Given this, you’d think there would be straightforward and consistent process for handling leaks to ensure that everyone shares the burden of repairing the water damage fairly, and in accordance with the association’s governing documents and the Florida Statutes (Chapter 718.111(11) Insurance). Unfortunately, it’s not that simple and more often than not homeowners, or the association, have to come out of pocket to repair damage caused in whole or in part by another. This blog will examine the division of responsibilities and will recommend strategies the association may use to help protect itself and its homeowners.

Rule of Thumb: When dealing with property maintenance or repair, look to the governing documents to determine who is responsible. When dealing with damage caused by a casualty, look to Florida Statute 718.111(11)(f) to determine who is responsible.

Per Florida Statute 718.111(11)(f), the association is responsible for everything except the following, for which the unit owner is responsible: all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit.

The legal and insurance community has taken the above to mean that “drywall out” is the responsibility of the Association but “drywall finishes (i.e., texture and paint) in” and “bare floor up” are the homeowner’s responsibility.

Example 1: A Toilet Leak, A Water Heater Leak, A Washing Machine Leak or A Hot Water Heater Leak

A 2nd story homeowner’s toilet has suddenly begun to leak due to a faulty wax ring, causing damage to the homeowner’s unit as well as the ceiling, walls and floors of the unit below. The association’s documents state that repair and replacement of toilets is the homeowner’s responsibility. As such, the homeowner is required to repair or replace the toilet. However, the damage resulting from the leaking toilet is considered a casualty and would fall under the Insurance Statute.

In this example, there are three parties involved: the Association, the homeowner whose toilet caused the leak, and the below homeowner.  We will assume for now that there was no negligence on the part of the homeowner with the leaking toilet (i.e., the homeowner didn’t know, or shouldn’t have known, that the toilet was leaking or going to leak). In this scenario, responsibility for damage caused by the leak would be divided as follows:

  1. The Association will repair the drywall and any damaged studs, insulation or electrical wiring within the walls.
  2. The homeowners will individually repair the personal property within their units, any damaged flooring, and the finishes on the drywall (e.g., paint, texture or wall paper).

Each party may contact their respective insurance company (condominium homeowner’s are not required to have insurance per the Florida Statutes but they may per the governing documents) to help cover the cost of the repairs.

The condominium statutes are silent regarding who is responsible for the cost of the initial dry out of the unit after water damage (i.e., removing standing water and installing proper fans). Obviously both the homeowner and the association are protecting their property by ensuring that all water is removed, no further damage is caused, and no mold issues develop. A proper dry out can be very costly and it is up to the association and homeowner to decide who will pay for this service. In my experience, it is easiest for the association to pay for the dry out as it moves the repair process along and ensures the association is meeting its fiduciary duty to protect the condominium property (failure to properly dry out a unit could cause deterioration to structural parts of the building). Another option is to split the cost with the homeowner. Further, if the homeowner has insurance, and intends to file a claim, the insurance company will often pay for the cost of the dry out.

Example 2: A Toilet Leak, A Water Heater Leak, A Washing Machine Leak or A Hot Water Heater Leak With Homeowner Negligence, Intentional Conduct or Failure to Comply with Association Rules

According to 718.111(11)(j), if damage to the condominium property is caused by homeowner negligence, intentional conduction or failure to comply with the rules of the association, the homeowner is responsible for repairing ALL portions of the damaged condominium property not covered by insurance proceeds. Further, according to 718.111(11)(g), when a homeowner is determined by the association to meet the criteria listed in paragraph (j), the association may complete the repair work to the condominium property (excluding the personal property of the homeowners) and charge the cost of the work to the homeowner. If the homeowner fails to pay, the association may collect the cost as if it were an assessment (see our blog on Collections Policies for more information). The homeowners that have sustained damage to their personal property (i.e. everything covered under Florida Statute 718.111(11)(f)) have the option to pursue legal action against the negligent homeowner.

So, in our example, let’s say that a plumber told the homeowner previously that the wax ring needed to be replaced in the toilet or a leak may occur but the homeowner chose not to make the repair. Or, let’s say that the wax ring actually began leaking because the homeowner (or homeowner’s guest) attempted to make a repair to the toilet himself and failed to properly reset the wax ring. In these case, the homeowner could be perceived as being negligent and the association may choose to complete a full dry out of the unit as well as make all repairs to the common elements (i.e. drywall out), and charge the homeowner that create the leak for the full cost. This statute gives the association a significant amount of power and the association should be careful as to how they enforce it. Negligence is often a matter of perspective and the burden of proof is on the association. As such, the association should obtain an opinion from legal counsel before deciding if they consider a homeowner negligent or not.

Enforcement Tip: Negligence is a very tricky topic. To avoid the likelihood of a legal battle, the association should build negligence into their rules and regulations whenever possible by creating a clear-cut definition of actions that are considered negligent.

As it relates to leaks due to an unexpected casualty, one such rule would be: “Homeowners MUST turn off the water to their unit if the unit is going to be vacant for more than 48 hours”. Leaving water on when there is no one in the unit that would notice a leak has been considered negligence by Florida courts in the past. Because the Board would adopt this as a rule of the association, Florida Statute 718.111(11)(j) allows the association to charge the homeowner who has not complied with this rule the full cost of repairing damage due to a water leak stemming from their unit. This is a particularly effective rule given that leaks from vacant units are frequent and tend to cause more damage than those from occupied units.

Another rule may be: “Homeowner’s (or their guests) must provide proof of liability insurance prior to completing any repairs or renovations to their units. With this rule in place, if a homeowner caused a leak themselves (which happens frequently) the association will either have the homeowner’s insurance information already and can immediately place a claim, or, if the homeowner failed to provide proof of insurance, the association may charge the homeowner the full cost of repairing the damage to the common elements caused by the leak.

 

Example 3: Professional plumber causes leak while replacing shower faucet

A 2nd story homeowner hires a plumber to replace the shower faucet. The plumber did not properly seal one of the connections, which began to leak and caused water damage to the ceiling and walls of the unit below. In this scenario, the plumber’s liability insurance would likely cover the cost to repair all damage to the property (including the homeowners’ personal property). However, if the plumber is not insured or refuses to provide his insurance information to the effected parties, the cost of repairs may end up falling to the association and the homeowner who suffered water damage, or their respective insurance companies. The association and/ or effected homeowner could choose to take legal action against the plumber and/ or the homeowner who hired the plumber but this can often be cost-prohibitive, particularly if the damage was not severe. To help reduce the burden on the association and effected homeowners, the association can choose to put specific rules in place relating to maintenance or renovation work completed by a 3rd party vendor.

Enforcement Tip: The association should consider making it a rule that homeowners MUST utilize licensed and insured vendors, and must provide to the association proof of liability insurance for any vendor working within their unit prior to work commencing. As some vendors may be less willing to provide their insurance information after they have caused a leak at a job site, this requirement protects the association and homeowners, as it will allow the association to immediately place a claim for the damage. Further, if the homeowner failed to obtain proof of insurance, Florida Statute 718.111(11)(j) allows the association to charge the homeowner who has not complied with this rule the full cost of repairing damage to the common elements.

Developing proper strategies for preventing and responding to leaks is a complicated topic and should be discussed with the association’s attorney. A “leak action plan” should be established for all representatives to follow. To avoid legal action, consistent and effective response is key. When making changes to the association’s rules and regulations that have the level of impact these “negligence” rules do, it is important that the association communicate to the membership to ensure that homeowners are properly informed of the new rules.

Feel free to reach out with any questions.

Thanks,

Emily

P.S. If you are a condominium homeowner who has recently experienced a water leak and you are looking for clarification on your rights and responsibilities, please contact us. Ryan (my husband/ co-blogger) offers legal counsel and practical advice on these issues at a reasonable hourly rate for our readers. There are no retainers required or minimum fees. Send me an email at emily@flcondoassociationadvisor.com and I will respond promptly with more information and next steps. 

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Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

Posted on June 27, 2013 | 46 Comments

As promised in the discussion of condominium associations’ Official Records, we have dedicated a post exclusively to the accounting records that are required to be maintained pursuant to Florida Statute 718.111(12)(a)(11).

 All accounting records of a condominium association must be maintained for at least 7 years. To be prudent, an association may decide to keep all association records since developer turnover. If your property does not have a lot of storage space for hard copy records, there are many companies that specialize in scanning records electronically and/or storing hard copy records. These services are relatively inexpensive and serve to both reduce clutter and protect the association’s records from fire, theft, or natural disaster.

Most professional management companies use high-end accounting software to maintain the bulk of their associations’ accounting records. This software can cost thousands of dollars so purchasing software like this doesn’t make much sense for the self-managed condominium. For very small condominiums, a program such as excel can be used to maintain the association’s financial statements, including homeowner ledgers. However, for larger condominiums, accounting software such as QuickBooks, which costs in the $300 range, likely makes the most sense. As I have mentioned in previous posts, if the Board of Directors does not have a member with a strong accounting background, hiring a 3rd party accountant to maintain the association’s books may be necessary.

Here’s what the FL Statutes say condo associations must maintain:

1.    Accurate, itemized, and detailed records of all receipts and expenditures.

If this seems very broad to you, that’s because it is. The FL Statutes leave it to each condominium to determine exactly what they need to keep, and in what format, in order to meet this requirement. As part of the association’s routine bookkeeping, all monies received and spent will be entered into the association’s accounting software. Generally, these programs allow the user to enter a description of each deposit or expense. Be sure to enter detailed descriptions for each entry including the parties involved and the reason that the funds were received or paid. You’ll thank yourself for doing this the first time you try to look back at specific transactions from previous years. Further, I strongly recommend you keep all of the following either electronically or in hard copy:

  • Copies of all checks received and written by the association
  • Copies of all monthly bank statements for all association bank accounts
  • Copies of all “lockbox” payment detail if this service is used by the association
  • Copies of all final invoices paid by the association (typically these invoices are kept with the copy of the check that paid the invoice)
  • Copies of all reconciliation reports (showing that the bank statements and the association’s bookkeeping reconcile each month-end)

2.    A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid on the account, and the balance due.

This refers to the balances owed by each homeowner for their maintenance fees. This information should already be maintained in the association’s accounting system and there is nothing else special that needs to be done. These balances should include any accrued late fees or interest. I recommend you keep any other amounts owed to the association (e.g. fines, charges backs for work completed by the association on behalf of the homeowner) on a separate ledger for each homeowner as the association may only lien and foreclose on a unit for past due maintenance fees (and associated late fees/ interest). This makes it easier for the association to provide accurate account balances to the association’s attorney (during collection efforts) or prospective buyers. Along with this requirement, I recommend that the association maintain monthly A/R aging summaries (showing those units that are 30, 60 or 90 days past due).

3.    All audits, reviews, accounting statements, and financial reports of the association or condominium.

What an association must maintain specifically under this requirement depends in large part on the size of the association. According to Florida Statute 718.111(13), each association must produce a year-end financial report (or have contracted for the production of this report) within 90 days of fiscal year-end. The type of report required is as follows:

  • An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare GAAP compiled financial statements.
  • An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare GAAP reviewed financial statements.
  • An association with total annual revenues of $400,000 or more shall prepare GAAP audited financial statements.

Details on how to prepare the above financial report are provided in Rule 61B-22.006 of the Florida Administrative Code. The Florida Statutes allows the voting interests of the association to approve a waiver of compiled, reviewed or audited financial statements for up to three consecutive years.

Along with the above described report, I recommend that the association maintain copies of balance sheets and income statements for each month-end that have been approved by the Board.

4.    All contracts for work to be performed. Bids for work to be performed are also considered official records and must be maintained by the association.

This requirement is relatively self-explanatory; however, there are some simple ways to keep track of all of this information in an organized fashion. I recommend that all long term contracts approved by the association be kept together for reference. It may be helpful to keep a list of all contracts including their maturity dates and renewal/ termination provisions. As mentioned above, all other contracts/ invoices can easily be kept along with a copy of the check that was issued by the association to pay the contract/ invoice. Lastly, all bids that were received for work must be kept as well. I recommend keeping these separate from those bids that were actually approved to avoid confusion.

As was mentioned in a previous post, it is a smart idea to keep a copy of each packet that is provided to the Board at each meeting. These packets typically include all bids related to agenda items so maintaining the packets would comply with the above contracts requirement. These packets also typically include recent financial statements, minutes from the previous meeting, the meeting agenda, and more of the items that are considered part of the official records of the association.

I am available via email if you have any questions or comments.

Ryan

 

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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