A Change to the Financial Reporting Requirements

Lost in all of the controversy surrounding the recent amendments to Florida's laws governing community associations--and, in particular, the changes to condominium association laws enacted by House Bill 1237--were revisions to the financial reporting requirements for condominium and cooperative associations.

House Bill 6027 became effective on July 1 and amends provisions of Chapters 718 and 719 of the Florida Statutes.   House Bill 6027 is a "two edged sword":

  • On one hand, it removes the "fewer than 50 units" exception that allowed community associations to simply prepare a report of cash receipts and expenditures instead of either compiled, reviewed or audited financial statements regardless of the association's annual revenue.  House Bill 6027 also removes this exception from F.S. Section 720.303, which governs financial reporting for mandatory homeowners associations.
  • On the other hand, condominium and cooperative associations are no longer prohibited from waiving the statutorily provided financial reporting requirements for more than 3 consecutive years.   This prohibition against associations waiving these reporting requirements more than 3 years in a row was a fairly recent addition to Florida statutes.  House Bill 6027 effectively "turns back the clock" and allows associations to waive those financial reporting requirements on an annual basis for as long as the association's members see fit.

At least in regards to these financial reporting requirements, "what the legislature giveth, the legislature taketh away".

I hope all of you had a safe and restful 4th of July and that we'll have another uneventful hurricane season.

 

A Few Important Differences in Florida's Laws Governing Condominiums and Cooperatives

ROC managers, board members and the professionals that advise them quite often long for the "good old days" when the Florida Statutes governing condominium associations (Chapter 718) and cooperative associations (Chapter 719) were almost identical in provisions concerning elections, eligibility to run for the board, and waivers of financial reporting requirements. 

Those days are, for better or for worse, long gone.   Here's a quick sampling of the just a few of the important differences that now exist between the statutes governing cooperatives and condominiums:

  1. Terms of board members:   F.S. Section 718.112(1)(d) now provides that the terms of all members of the board of directors of a condominium association expire at the annual meeting unless a majority of the unit owners approve a provision in the bylaws that permits staggered terms of no more than two years.   F.S.  Section 719.106(1)(d) imposes no such term limitation on board members in cooperative associations.
  2. Eligibility to serve as a board member:   F.S. 718.112(1)(d) also prohibits co-owners of a unit in condominium associations with more than 10 units from serving on the board at the same time and also prohibits persons who are more than 90 days delinquent in payments of any fees or assessments due to the association, and many persons convicted of a felony from such service.  There is also a rather curious requirement that any candidate for the board of a condominium association sign a form certifying that "he or she has read and understands, to the best of his or her ability, the governing documents of the association" as well as the provisions of Chapter 718 and any " applicable rules".   Any member of a cooperative association that wishes to run for the board of directors will find that Chapter 719 does not contain any of these eligibility requirements or prohibitions if he or she wishes to serve his or her community.
  3. Financial reporting requirements:  F.S. 719.104(4)(b) allows cooperative associations that are larger than 50 units  to waive the requirement that the association's financial statements compiled, reviewed or audited.   This waiver must be done annually by the vote of a majority of the voting interests present, in person or by proxy, at a duly called membership meeting.   F.S. 718.111(13) now prohibits a condominium association's membership from waiving these financial reporting requirements for more than 3 consecutive years.

I've just highlighted a few of the many differences that now exist between Chapters 718 and 719.   We haven't even touched on Chapter 720 HOA's or those "hybrid" ROCs that may or may not be governed exclusively by the provisions of Chapter 617, Florida's statutes for not-for-profit corporations.   With the next session of the Florida legislature just a few months away, we'll just have to wait and see if there's any hope of returning to those "good old days".

Stay tuned.